Should you buy Volkswagen (XETRA: VOW3-DE)shares since the German automaking giant got itself embroiled in the emissions scandal?

Many investors did just that in the middle of last week after the stock had lost some 30 percent amid fears of a hefty fine of up to $18 billion from the U.S. Environmental Protections Agency (EPA) and the additional fallout from civil and class actions suits in the US.

But by Wednesday, it dawned on some investors that the selloff – exacerbated by short-sellers – had been overdone and that the stock might provide a bargain. The company also moved quickly to apologize, assign blame and replace chief executive Martin Winterkorn.

Deutsche Bank analysts are still cautious though: " We think the impact on the operational business – namely volumes, residual values, pricing and costs - is even harder to estimate and is the key concern here," it wrote in a note on Tuesday.

"A main element of our buy case had been significant cost cuts. We now believe that rising costs for diesel cars will offset most of the effects. Most importantly, we have taken a more cautious stance on the growth outlook for VW and Audi and believe pricing will come under pressure due to the reputational damage. Consequently, we cut our 2015-2017 earnings by up to 35 percent."

Deutsche Bank adds that "any 1 billion euro additional fine would take away 2.02 euros per share" – it has downgraded the stock from Buy to Hold.

Saxo Bank's Head of Equity Strategy Peter Garnry agrees: "We don't think the current provisions are big enough. VW has set aside 6.5 billion euro to cover the costs, but that market has already taken out 25 billion euros," he said in an in house interview on Wednesday

"Clearly, the market thinks the fine will be bigger than the ($)18 billion the EPA has talked about. This is a huge scandal and it looks like this was not an isolated case in the US, but is more widespread across the world. (…) Nobody knows how far the scandal can go"

That begs the wider question: Are investors catching a falling knife or is buying heavily beaten-down crisis stocks a viable strategy?

Take BP (London Stock Exchange: BP.-GB)– which swiftly became an enfant terrible after the disastrous Gulf of Mexico spill. If you bought BP's stock after disaster and held it until today, you would have lost half of your money. Buying on the dip did not turn out to be a profitable strategy as the losses and legal problems stemming from the environmental disaster rose relentlessly. Other issues like the precipitous drop in the oil price also contributes to BP's stock woes.

Look at Toyota (Tokyo Stock Exchange: 7203.T-JP)though, which was marred by recalls in 2010, the story looks somewhat different.

Between February 2010, to March 2014, Toyota stock has gained 45 percent. Yes, it too did drop after the recalls. Toyota's stock price had slumped by 20 percent—a $35 billion loss of market value in February of 2010. But the longer term performance shows it has regained speed.

Bottom line – generalizing the investment strategy around three crisis stocks is close to impossible.

But think about this: Apart from the fundamental question of how risk averse you are, the other key issue is also just how long your time horizon for investing is. Buying on the dips may prove a profitable strategy if you're spot-on with timing. However, very few of us are.

In the absence of the light at the end of the tunnel, the more prudent strategy may be to steer clear of crisis stocks. After all, a stock that looks cheap may be a bargain for a reason.

Carolin Roth is based in London and is anchor for Worldwide Exchange. You can follow her on @carolincnbc

Follow us on Twitter: @CNBCWorld

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