What You Miss if You Sell During a Panic

It’s starting to get volatile out there. This time, the culprit is the new disease out of China: the coronavirus. China was widely criticized for how it handled the SARS outbreak in 2002-2003, so officials are trying to be more proactive this time, as 106 people have died and another 4,500 have been infected in China.

There is no doubt that the lockdown of 15 cities in Hubei province is going to curtail economic growth. The good news is that most of the world is not victim to the virus; cases outside of China are few and far between.

Between the viral outbreak and political uncertainty – from impeachment to Brexit – it all feels very similar to situations we’ve dealt with in the past.

In the past 10 years, we’ve had the Ebola virus…the “fiscal cliff,” when tax cuts would expire and automatic spending cuts would kick in…and the “taper tantrum,” when the Fed announced it would tighten fiscal policy. (To name just a few!)

Yet the bull market has just kept going. And every time the market pulled back along the way, I told readers to buy.

Let’s take a look back at some of these pullbacks. At the time, some panic was in the air…even if we barely recall them now. And when you look back at how they played out — including our best Growth Investor trades of the time — events like that can be very instructive in taking actions today.

Keep these lessons in mind next time some media talking head starts to spout gloom and doom.

Fiscal Cliff Scare

November 2012
S&P  7%

I said: “I expect that the market will stabilize considering that it yields significantly more than going to cash. Once we have some resolution on the impending fiscal cliff, we should see strong upside in the market.” (Nov. 9, 2012)

Outcome: S&P  6% by New Year’s,  15% by April

Best Trades:

Ticker
Company
Country
Industry
Timeframe
Our Result
VMED Virgin Media Inc. U.K. Telecom 11/9/12 – 2/8/13 +43%
CVI CVR Energy United States Oil Refining 11/21/12 – 3/22/13 +22%
ALJ Alon USA Energy United States Oil Refining 11/30/12 – 4/10/13 +23%

Fed “Taper Tantrum”

Spring 2013
S&P  5%

I said: “I’m expecting to see plenty of scare tactics in the news media, but we’re going to use any volatility as an opportunity.” (Feb. 22, 2013)

Outcome: S&P  22% by year-end

Best Trades:

Ticker
Company
Country
Industry
Timeframe
Our Result
NXST Nexstar Media United States Broadcasting 4/5/13 – 6/6/13 +57%
CCIX Coleman Cable United States Electronics 4/25/13 – 7/24/13 +50%
IBA Industrias Bachoco Mexico Agriculture 3/18/13 – 9/30/13 +24%
SNTS Santarus United States Pharmaceuticals 4/15/13 – 11/8/13 +81%

 

Ebola Virus Scare

Fall 2014
S&P  6%

I said: “I was in Dallas last Tuesday, where the first U.S. Ebola case was announced. I can confirm that the airport was busy, so the fear that everyone will stop flying planes is simply not true. The truth is that many investors like to ‘react’ first and then ‘think’ second, which significantly impacts the stock market’s direction. But I’m very optimistic.” (Oct. 6, 2014)

Outcome: S&P  5% by April

Best Trades:

Ticker
Company
Country
Industry
Timeframe
Our Result
MIC Macquarie United States Transportation 11/19/14 – 3/11/15 +12%
CLDT Chatham Lodging United States REIT 10/8/14 – 3/27/15 +22%
EW Edwards Lifesciences United States Medical Specialties 10/28/14 – 4/7/15 +18%

 

China Market Crash

June 2015 – Jan. 2016
S&P  10%

I said: “While no one likes to ring in the New Year with stock market volatility, I’m not remotely worried about today’s activity. I consider today’s pullback a buying opportunity, especially for our top-rated stocks on the Buy List.” (Jan. 4, 2016)

Outcome: S&P  11% by year-end

Best Trades:

Ticker
Company
Country
Industry
Timeframe
Our Result
ORA Ormat Technologies United States Alternative Power 2/17/16 – 11/17/16 +29%
TSRYY Treasury Wine Estates Australia Beverages 1/27/16 – 12/5/16 +21%
EDU New Oriental Education China Education Products 2/3/16 – 12/5/16 +37%

 

Brexit Vote

June 2016
S&P  3%

I said: “I look for our stocks to emerge as an oasis and continue to break out in the coming weeks, especially as second-quarter earnings announcement season gets underway in July.” (June 27, 2016)

Outcome: S&P  8% by mid-July,  15% by Aug. 2017

Best Trades:

Ticker
Company
Country
Industry
Timeframe
Our Result
PATK Patrick Industries United States Building Products 6/28/16 – 12/27/16 +35%
HDSN Hudson Technologies United States Environmental Svcs. 8/9/16 – 3/15/17 +47%
WLDN Willdan Group United States Engineering 8/31/16 – 8/16/17 +37%

Late 2018 Market Drop

Oct. 2018 – Jan. 2019
S&P  16%

I said: “It is unfortunate that the stock market allows the computers to dominate trading and jerk the stock market around, but that is essentially what happened in October. Fortunately, good stocks ‘bounce like fresh tennis balls.’ As more positive third-quarter results are announced, I expect a big rebound in our fundamentally superior stocks.” (Oct. 29, 2018)

Outcome: S&P  11% by April,  26% by Jan. 2020 to new highs

We’ll see how this continues to play out — and already we’re sitting on gains like +51% on Paycom Software (PAYC), +81% on Dexcom (DXCM), and +75% on Veeva Systems (VEEV) here at Growth Investor.

I don’t know about you, but my takeaway is simple: Being selective pays off. If we’d simply traded an index ETF to “buy the dip,” we’d have made 5% here, 15% there. Instead, by targeting lesser-known stocks — with strong fundamentals, in certain industries — we had much better gains, as you saw.

Note: Time after time, these negative events happen – then along comes a bullish catalyst to propel stocks higher again. Very often, it’s simply earnings reports that do the trick!

And right now, it’s my favorite time of year: when companies release their fourth-quarter results. I’m not going to be scared out of the market during earnings season. And I hope that you won’t be either.

I’m finding plenty of stocks that are enjoying double-digit earnings and sales growth. My favorites are the ones that are taking advantage of big, revolutionary trends that reshape our world: 5G…the Internet of Things…and now, the “mother of all technologies.”

Click here to watch my free briefing on the investment opportunity here. And consider signing up for Growth Investor while you’re there. I’ll be releasing 3 new buys in Friday’s Monthly Issue.

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