How does this "Crisis Investment Model" find opportunities during a market crash?

When the market declines, most people are doing one thing:

Panic.

But what truly determines gains is never the market trend, but—whether you have a set of crisis response cognitive systems.

In this article, I have organized a complete set of methods I have been using long-term:

“Crisis Investment Model”

【One-sentence core】

Crisis and opportunity are never opposites, but two stages of the same thing.

The real opportunity often emerges within a crisis.

1. Summary Introduction of the Crisis Investment Model

Crisis and opportunity are one entity; they exist as two opposing yet dialectically unified aspects.

The core of crisis investing is to seize the moment when crisis and opportunity switch, that is, when excellent companies face crises causing their stock prices to plummet, buy at a sufficiently cheap price, then patiently wait for value to return, and take profit at the right moment.

2. Conceptual Diagram of the Crisis Investment Model’s Central Principles

“Transformation of Birth and Death in Crisis”

The law cycle produces the duality of crisis and opportunity. Crisis and opportunity generate the four symbols of emergence, fluctuation, rise, and fall.

Crisis is the beginning of opportunity; opportunity is the end of crisis. There is opportunity within crisis, and crisis within opportunity. Crisis and opportunity are one body, mutually generating and cycling.

The movement of the opposite way is the motion of the Dao; it goes against human nature and follows the Dao.

“Turning Points as Growth Points”

Any system, once its logic is self-consistent, will inevitably produce new bugs, and the solution is to use a larger, integrated system.

But when the new system is established, it will inevitably generate new bugs, and the solution again is to use an even larger, integrated system, in a continuous cycle.

These bugs are the crisis or opportunity; once past, they become growth points; if unresolved, they become stalls.

“Asymmetrical Strategy”

Risk has no percentage; it only has occurrence and non-occurrence. Occurrence is 100%, non-occurrence is 0%.

Abandon the risk strategy of averaging to avoid being destroyed by extreme events.

Maximize safety and maximize speculation. Reduce harm from adverse factors, increase gains from favorable factors.

The greatest known loss cost, with theoretically unlimited potential gains.

Total destruction risk is zero; losses are limited, gains are unlimited.

“Everything Starts from the Heart”

Humans are both the starting point and the destination of everything; humans are both the end and the beginning of everything.

Everything is for humans, everything revolves around humans, everything is humans, everything is centered on humans.

Companies are operated by humans; organizations are managed by humans; markets are composed of humans; strategies are formulated by humans; needs are discovered by humans; profits are realized by humans; products are used by humans; stocks are traded by humans. But all origins and cessations of everything arise from the human heart.

There is nothing outside the heart; outside the heart, there is no way; outside the heart, there is no object; start from the heart.

3. Principles for Executing the Crisis Investment Model (Self-discipline, cautious independence, maintaining balance, following rules, using simplicity to manage complexity, heart at peace)

1. Short-term arbitrage (asymmetrical bets, limited losses, unlimited gains)

① Buy low and sell high repeatedly to profit from the spread. ② Maintain ample cash flow; when opportunities arise, act decisively. ③ Continuously accumulate positive cash flow, creating an efficient feedback loop.

2. Long-term holding (taxes are one of the biggest costs; turn taxes into interest-free loans)

① Companies earn profits and also earn people’s trust; products break free from commodity constraints. ② Network effects amplify continuously; marginal costs keep decreasing. ③ Rapidly growing into a monopolistic essential infrastructure.

3. Self-management (learning daily, improving daily, following the Dao, the only important thing is one)

① Ignore noise: such as insider info, authority, market trends, news, macroeconomics, analysts, Wall Street, celebrities, investors, officials, experts, etc. Always focus only on whether the company can continue to make money.

② Avoid emotions: adhere to principles of not following the herd, not proving, not predicting, not ego, not arrogance, not leverage, not overreacting, not driven by inertia—always start from whether the company can sustainably generate profits.

③ Focus on essentials: uphold honesty, independent thinking, patience, confidence, follow the trend, respect common sense, respect laws—always focus on the company’s future sustainable profitability.

4. Trading Principles of the Crisis Investment Model (Stock prices reflect supply and demand, not company fundamentals)

1. Buy (when others are fearful, I am greedy; buy when no one is paying attention)

① Buy at 90% of the investment amount. ② Buy at 70% of the investment amount. ③ Buy at 50% of the total investment amount.

2. Sell (when others are greedy, I am fearful; sell when everyone is clamoring)

① When stock prices surge significantly beyond intrinsic value, accompanied by phenomena such as: media consensus, rating upgrades, capital bullishness, peers benchmarking, founders mythologized on social media, government stimulus overextending, retail blindly investing.

② When market cap is seriously overestimated and far exceeds intrinsic value, with phenomena like: widespread reckless stock trading, market soaring, bullish consensus, self-proclaimed experts, high P/E ratios, market exuberance, irrationality.

③ When investment judgment is mistaken, future profitability certainty is lost, and stop-loss is necessary. Signs include: diversification without focus, irrational inertia, inefficient capital allocation, low operational efficiency, rising costs, shrinking market size, declining profit margins, decreasing market share, management chaos, moral decline.

3. Risk Control (the biggest risk comes from not knowing what you are doing)

① Ensure overall safety with zero bankruptcy risk, with limited local losses and unlimited profit potential. ② Always adhere to the margin of safety; each stock’s buy price must be more than 50% off. ③ Do not invest in what you do not understand; hesitate to invest, rather miss out than make wrong investments.

5. Sources of Opportunities in the Crisis Investment Model (The greater the coverage of reversible crisis information, the lower the market’s mispricing, and the higher the potential future gains)

1. Key disclosures by official authoritative media.
2. People, events, and things in daily life around you.
3. Trending topics on social media.

6. Methods for Research and Trading in the Crisis Investment Model (Crisis stems from human biases; opportunities come from reversals in human nature)

1. Detect crises (all crises in companies ultimately are financial crises)

① Self-rescue: Can shrinking operations, reducing costs, cutting expenses, layoffs, and salary cuts handle the crisis? ② Limb rescue: Can repositioning, focusing on core business, divesting non-core assets handle the crisis? ③ External rescue: In the current crisis environment, can enough funds be raised to cope with the crisis?

(Each question scores one point; scoring at least one point passes. All three questions combined can also earn one point.)

2. Judging opportunities (whether there is sustainable future profitability)

Does the company have governance capabilities to make the organization operate efficiently (can people do it)?

① Is the company mission-driven? ② Does the corporate culture inspire kindness? ③ Is the top leadership entrepreneurial? ④ Do the organizational production relations facilitate smooth productivity? ⑤ Are past large M&A or buybacks high buy-low sell-high, creating value or destroying it? ⑥ Is decision-making close to market and user needs? ⑦ During crises, does management reduce holdings or increase buybacks? ⑧ Does the business model help maintain market competitiveness? ⑨ Are the overall goals and sub-goals clear and coordinated? ⑩ Is the strategic focus long-term on the industry?

(Each question scores one point; six or more points pass.)

Does the business have sustainable growth potential (is it feasible)?

① Monopoly rights such as exclusivity, patents, or licenses. ② Leading market share among peers. ③ Absolute pricing power. ④ Unreplaceable control over the supply chain. ⑤ Extreme focus on innovation. ⑥ Products with excellent cost-performance ratio. ⑦ Self-replicating growth driven by word-of-mouth. ⑧ Channel coverage across all scenarios. ⑨ Still has high growth potential in the future. ⑩ Niche scene branding or user perception as a category.

(Each question scores one point; six or more points pass.)

Does the management have the ability to generate shareholder profits (is it feasible)?

① Return on invested capital has long been top-tier in the industry, with current deterioration showing clear cyclical or one-time features. ② Revenue growth rate has long been top-tier, with current deterioration showing clear cyclical or one-time features. ③ Net cash ratio has long been top-tier, with current deterioration showing clear cyclical or one-time features. ④ Cost ratio has long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑤ Net asset liability ratio has long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑥ Shareholder earnings have long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑦ Profit retention creating market value has long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑧ Net profit has long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑨ Capital expenditure to depreciation ratio has long been top-tier, with current deterioration showing clear cyclical or one-time features. ⑩ Return on equity has long been top-tier, with current deterioration showing clear cyclical or one-time features.

(Each question scores one point; six or more points pass. The three big questions each count as one point, with at least two points needed to pass.)

3. Timing of Decisions (Making big money is not about buying or selling, but waiting)

Use more than ten valuation methods suitable for this industry to cross-verify and confirm the intrinsic value, ensuring the stock price is below 50% of the intrinsic value.

4. Validation of Conclusions (Doing great things with excellent people)

① Leading profitable business with high growth. ② Intrinsic value is mispriced by the market and the buy-in price is very cheap. ③ Mission, vision, values, strategic positioning, planning rhythm, goals, and results are aligned.

—— Less is gained, more is confusion; remove human desires, follow the Dao.

March 15, 2026
19th iteration of the Crisis Investment Model

If you’re interested in US stocks / crypto markets,
welcome to follow. I will continue to update practical analyses based on this model #危机投资模型