Right before yesterday afternoon’s spectacular rally in US stocks, Andrew Snyder recommended investors buy oversold shares. In particular, he said Nortel (NYSE:NT), which was down 45% since the start of the week, didn’t merit the plunge and was due a short-term bounce. NT today is up by only a fraction of a percent. This means there’s time to get in on this trade.

This from Today’s Financial News:

Investors are scared. Nearly everywhere you look there are signs of economic calamity.

What is an investor to do?

First, do not panic. Those kinds of reactions are how markets topple and huge sums of wealth are lost.

The key to success right now is remembering there are two major factors that control the markets. They are fear and greed. This concept is one of the first things taught in Investing101.

Let’s Get Emotional

Greed makes prices go up and creates financial anomalies like tech bubbles and credit crunches. Without excessive amounts of greed on Wall Street, we would not be in the current crisis. But we would also never have seen the Dow reach 13,000 in May. Everything in investing is a trade-off.

The days of greed are gone, for now. Fear is overwhelmingly controlling the market, just as it should be. When former ultra-bulls like Lehman Brothers (NYSE:LEH), AIG (NYSE:AIG), and Bear Stearns are lying dead on the Street getting picked to nothing by vultures, investors have good reason to be fearful.

Use that healthy fear to make solid investment decisions. Invest in companies you are not scared to be part of.  Throw away the rest.

Start looking for undervalued companies now and start buying. The market has made a tremendous slide in the last few days. Many companies that do not deserve discounting saw huge price cuts.

One of these is Nortel (NYSE:NT). Shares of the telecommunications manufacturer made a precipitous plunge today, down nearly 45% to levels unseen since the early 1980s, nearly three decades ago.

Normally, news that revenues will be slightly lower than analysts forecasts (Nortel expects a drop of two to four percent in annual revenues) calls for a small share price pullback, maybe 10% or 15% at most.

In a fearless market like we had just a few months ago, a 45% drop was reserved for the most speculative of companies, not a $2-billion multi-national powerhouse.

When it comes to investing, a little greed is never a bad thing. Go ahead and start your value search by grabbing shares of Nortel.  It deserves a hit to its share price, but not one of this magnitude. You should not plan on owning shares for more than a week or so.

The malfunction of some of the world’s largest financial institutions is scary stuff.  It is no wonder many investors are running in fear. Fortunately, if you know where to look and how to control your emotions, there is big money to be made.

PS: In yesterday’s Hidden Value newsletter, Andrew recommended three Russian stocks oversold in the recent market crash. One of those – Rostelecom (NYSE:ROS) – has already made over 35% gains. Andrew says its a good time to book these profits, but recommends readers continue to hold his other Russian picks: Mechel OAO (NYSE:MTL) and Vimpel Communications (NYSE:VIP).

Source: Market crash: Time to Buy Nortel (NT)?