As we have seen again recently, confidence, that most ephemeral of commodities, is in short supply — a state of affairs which ensures most investors remain reluctant to contemplate a return to equity markets.

Nevertheless, an increasing number of analysts claim that at current levels, some share prices are so depressed that they offer compelling opportunities for the brave.

Most investors remain unconvinced. The same folk might suspect that to make serious money, it is necessary to take serious risks, but in fact the opposite is correct. Avoiding serious loss is a precondition for sustaining an acceptable level of compound growth.

While there has been a marked loss of faith regarding the likelihood of medium-term prosperity, most investors do appreciate the best way of making substantial stock market returns is to buy low and sell high.

However, it requires discipline to overcome the — mostly emotional — demons that impede investment activity during trying times.

The rapid demise of our banking system does not help matters. Banks, formerly as ‘blue chip’ as they come, have disintegrated to become heavily-subsidised arms of the state, and investors fear other sectors could follow suit.

The effect has been to tar every stock with the same brush and investors who recognise this and can ignore the psychological fallout caused by banking failures might be best placed to take advantage. But is there a tried and tested method of capitalising from a depressed market?

Opinion is divided.

On the one hand, some analysts suggest all equity purchases should be subject to a rigorous testing process, and warn that this is not a market in which investors should buy shares, if they have any reservations regarding a company’s future prospects.

It is sound advice, but there is an alternative view which maintains that should you wait until every box is ticked prior to buying back into the market, you are unlikely to acquire anything.

Analysts in this alternative camp believe that it is more important to take a position before the market turns, as it is virtually impossible for investors to time their re-entry to perfection.

Frustratingly, however, investment is not an exact science. According to Benjamin Graham and David Dodd, whose seminal work, Security Analysis, was described by Warren Buffett as ‘the bedrock upon which all of my investment and business decisions have been built’, there is no way of avoiding this uncomfortable truth.

This should not, however, deter the intrepid investor, for Graham and Dodd claim that enough may be understood about a company to make an investment in it worthwhile over the longer term.

This is not to say that investors should ‘capitalise hope’, permitting their calculations of future returns to run riot.

Studying tangible factors such as published accounts, which determine an enterprise’s current and possible future strength, is a far safer calculation.

It follows that establishing an organisation’s intrinsic value prior to investing is of crucial importance. Why? Because identifying discrepancies between intrinsic value, and a company’s current share price, could pay enormous dividends.

Regrettably, intrinsic value is an elusive concept, although investors can establish a decent basis for calculating it, taking account of the value of a company’s assets, earnings, dividends and definite future prospects.

For the timebeing, however, I suspect such calculations are being made only by the fearless.