It is inevitable that investors in the stock market will have to endure many pullbacks, corrections and bear markets. That is, of course, assuming you are a true investor who holds for the long term, and not traders who call themselves investors yet attempt to time the market.
There is nothing wrong with timing the market per se, but you must be aware that the odds of an average investor making the correct buy and sell decisions are terrible. That’s why it is so important that every investor has a large portion of their portfolio in a long-term allocation.
The periods of weakness that all investors must endure are often caused by panic. This panic selling could lead to a quick 5% pullback, or it could reach and even exceed 10% and enter correction territory. A study of the Dow Jones between 1900 and 2017 shows that a 10%-plus pullback occurs roughly once a year. A 5%-plus pullback happens an average of three times a year.
The Dow is currently in the midst of a 5%-10% pullback, something that — again — occurs several times a year. But for many, this time always feels different and panic always sets in amid the selling.
My advice is simple: Do not get caught up in the short-term selling and instead focus on the long-term fundamentals of the market and individual names on your stocks to buy list. Not only will this allow you to keep your head, it will also allow you to make a whole lot of money over the long term.
Today, I want to talk about three stocks to buy that have gotten caught up in various panic scenarios but shouldn’t be viewed as down for the count.
The first is Caterpillar (NYSE:CAT), which just hit a 52-week low after reporting earnings. The report itself was fine — earnings of $2.88 beat estimates for $2.83, while revenue of $13.5 billion also came in handily above consensus.
The problem that felled CAT stock is that investors were disappointed by comments regarding the trade issues between the U.S. and China.
Tariffs could definitely continue to affect quarterly numbers until the conflict is resolved, but I do believe a deal will ultimately get done between the two countries. That makes CAT a bargain-basement stock to buy with a 9x price-to-earnings ratio.
Nvidia (NASDAQ:NVDA) has entered bear market territory after falling 25% from the all-time high it set earlier this month. This semiconductor company is the leader in gaming, blockchain, autonomous vehicles and several other high-growth sectors of the future, and it was certainly due for a pullback.
When panic selling in the tech sector set in, that’s exactly what we got. Nvidia has lost almost all of this year’s gains.
Looking at the big picture, however, there is no question that the future of technology relies on NVDA, putting it among some of the better stocks to buy right now. Just look at how ubiquitous it has made itself in just the autonomous driving sector — as mentioned above, far from its only major source of growth. I suspect the sellers who panicked and sold will be sorry in a few months.
Canopy Growth (CGC)
Finally, there is Canopy Growth (NYSE:CGC), which has been on a very wild ride this month. The world’s largest marijuana company rallied into Canada’s official legalization of recreational weed on Oct. 17. But after hitting an all-time high the day prior, the stock began a pullback that now has it down 30% in just a week.
This action was a case of “buy the rumor, sell the news” in an extremely volatile sector. I expect this volatility will remain for the next few weeks. We will see days of mass panic and others of euphoria, and those who head for the hills on the down days will likely sell near the lows.
The bottom line is: Do not get caught up in the fear. Those who weather the storms will be rewarded. If you stick to your guns and focus on the long-term fundamentals on your stocks to buy list, you stand to make a lot of money over time.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.