In such cases, the market naively extrapolates the recent temporary negative news concerning a company, resulting in biased expectations of the companies' future prospects and these stocks tend to be underpriced. This strategy typically selects stocks with 'value' characteristics. It is an important dimension of investment and almost all investors consciously or unconsciously take it into account though they call it different things. The new directions of behavioral finance are being pushed toward biological metaphors by researchers like Andrew Lo. If purely mechanical number computation fails to give us useful models, perhaps the complex biological functions will.
Early evidence is strongly suggestive of success.