Whenever the stock market takes a hit, some people (and lolcats) act like the SKY IS FALLING. As scary as a drop like this seems, it’s a good thing for the vast majority of us. For people who are retired and living off of their investments, or those who need to sell them for one reason or another, a huge dive like this really bad news. Hopefully, those people invest more conservatively than I do. Whenever the market takes a dive, my portfolio seems to get punished twice as much as the rest of the market. That’s probably due to the fact that I tend to invest in either less known or less popular stocks that institutional investors would want to distance themselves from at the first sign of trouble. Losing a bunch of money by investing in the same thing that everyone else did, is one thing. Losing a bunch of money in some stock nobody’s heard of is something else. Fund managers buying into Microsoft at the end of 1999 had plenty of company. Those who loaded up on Gigamedia like I did last week might face some tougher questions.

As usual, there are some cooler heads at the Motley Fool. For the majority of us, a drop in prices is a good thing. That’s because most of us who invest plan to be net buyers in the near to mid-term future and when we’re buying, we want prices to be low. It’s only for those who chose to, or, due to excessive margin debt, are forced to sell now, that low prices are a bad thing. There’s an old Chinese chengyu related to this situation.

杞人憂天

Literally, 杞人 just means a person from the ancient country of and 憂天 means worry (about) the sky. This phrase comes from an old story about a man from Qǐ who often spent time sitting by himself considering all manner of problems. One day, he considered that the sky might collapse some day. The more he thought about it, the more worried he became. Realizing that everyone, good people along with bad would certainly be crushed by the sky when it collapsed, his spirits continued to sink. It disrupted his sleeping and eating and in the end, he worried himself to death. Ever after, “Qǐ man worrying about the sky” has been a short phrase associated with needless and possibly self-destructive worrying.

In the case of stock investing, selling out of everything after a sharp drop in prices is about as self destructive as it gets. A more logical position is that of Warren Buffet’s old mentor Benjamin Graham- be greedy when others are fearful. He should know, considering he made his fortune by buying stocks during the great crash early last century and then literally writing the book about value investing. The way I see it, whatever stocks I thought were good purchases three days ago are now even better purchases.

Right now, most of my portfolio is worth less than what it was in June, and most of the companies should be worth a bit more, since they’ve continued to grow. Considering the 15% plus dive in 盛大 prices, I was strongly tempted to buy more. It’s done so well since I bought it the last time the sky was falling that it represents a huge chunk of my portfolio, though. Buffalo Wings has dropped a bit, but it still isn’t what I would call cheap. Harris and Harris, Gigamedia, and Middlebury to a lesser extent, look awfully cheap, though. Other stocks I’ve been looking at also offer some bargains. A couple of Chinese power companies developing green power, Huaneng Power and Suntech Power, both look intriguing, as does online real estate company Loopnet. With this many bargains around, I’m very, very glad that I’ve been working so hard to keep a low margin balance and allow myself so much room for days like this.

In the end, I decided to make three investments.

1) Panera Bread- My investment choices continue to reveal my love of food. Fortunately, it’s a pretty safe bet that Americans will continue dining out in greater and greater numbers. Like Chipotle, Panera has an experienced, successful leader at the helm, is in the midst of regional expansion, and offers high quality, fresh, yummy stuff. Unlike Chipotle, Panera has hit a couple of set-backs in terms of meeting estimated EPS, and its price reflects that. I bought 50 shares at $40.47.

2) Panacos Pharmaceuticals- They’ve got a promising HIV treatment that’s making it’s way through phase 2b trials. It works on a different pathway than existing treatments, and it’s showing effectiveness on people who have already been given other treatments. The risk on this investment is extreme, but so is the upside. I bought 600 shares at $3.23.

3) Gigamedia- I did a thorough analysis of Gigamedia last week. With absolutely no new news, its price is down by nearly 20%. Buying the exact same good for way less than I was willing to buy it for two days ago is a no-brainer. I bought 175 more shares at $10.96.

Legal Disclaimer: All of the information in this article is accurate to the best of my knowledge. However, I make no guarantee about the accuracy of anything written above. I’m not responsible for any mis-typings, or any other errors in the information. If you purchase any stock solely because I did, you do so at your own risk.