2 Names I'm Buying as S&P 500 Plummets From All-Time High to Correction
Here's why I'm deploying dry powder on two positions amid major uncertainties in the economy and stock market.
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If nothing else over the past few weeks, the Wall Street nostrum that "stocks take the escalator up and the elevator down" has played out in spades.
Equities moderated their losses on Tuesday following their worse daily plunge since 2022 on Monday. The NASDAQ barely ended in the red on Tuesday after losing 4% of its value the previous day. Canada and the U.S. continued to play their tit-for-tat game Tuesday as the tariff war between the two large trading partners escalated yet again.
Over the past three weeks, the S&P 500 has gone from an all-time high to nearly being in an "official" correction. Given the surge in volatility and major uncertainties around the economy and trade policies, I would be surprised if equities don’t enter into correction territory in the weeks ahead. That said, only five corrections have gone on to be bear markets since 1974, and the market was historically overvalued before the recent sell-off.
I continue to add to my positions utilizing covered-call orders during this dip in the markets. Fortunately, I had plenty of short-term treasuries in my portfolio, so I have plenty of dry power to incrementally deploy. There are certainly lower entry points to take advantage of than there has been in some time. And while it is likely that the economy contracts in the first quarter, the chances of a recession still seem less than a coin flip and in that scenario, it is likely to be a shallow and short-lived one in my view.
I pulled the trigger and added some more shares to KeyCorp KEY on Tuesday. I originally opened a small "starter" position in this regional bank in February. Like the stocks in most regional banks, the shares were taken out to the woodshed during the sell-off on Monday. However, this regional bank has a very low exposure level to commercial real estate in its loan book. The shares also now yield north of 5%, which should help put a floor under the stock. In addition, Citigroup upgraded the shares on Monday after their decline. Citi’s analyst noted the bank’s solid fundamentals and cheap valuation at roughly eight times normalized earnings as the reasons for the upgrade. I concur.
I profiled LifeMD LFMD in mid-February as a promising telehealth concern. The stock soon sold off as did most small caps as the equity market went into its recent risk-off funk. I added to my holdings early Tuesday right after the company posted Q4 numbers that easily beat expectations. The company beat by a few pennies a share on the bottom line and came in way above the consensus on the top-line, clocking in with 43% year-over-year sales growth. Free cash flow nearly doubled in FY2024, and management provided FY2025 guidance that was above the consensus estimate as well. This should ensure the investment community that the company will continue to perform even as economic uncertainty has increased in recent weeks.
At the time of publication, Jensen was long KEY and LFMD.
