I agree, averaging down makes good sense when one understands and believes in the fundamentals of the stock, and is convinced it will turn around. Essentially then it is simply buying a underpriced stock which you believe will increase in price, and in which you already own shares that were bought at a higher price.

It is not a good strategy when blindly applied to a stock just because it is dropping though. And that does happen.

Cheers,

Bluenoser