During Tuesday's market panic, I recommended buying Facebook and AMD. On big down days, I find it comforting to know what Tony Mitchell and Robert Frazier (both up about 30% this year) are doing. I've been working with Tony for more than 18 years and Robert for over 13. They have both delivered great returns through bull and bear markets. When everyone is scared, these are the guys I want in in my corner.
Big down days happen when people are misled by poor reporting, faulty reasoning, and sensational headlines. In yesterday's coverage of trade talks with China, many reporters pushed the conclusion that the President is recklessly endangering the economy. It's easy to see why investors were anxious to sell.
When it's primarily individual investors who panic you get small dips. But when institutional investors panic, the Dow can drop 500 to 1000 points in a day. At one point yesterday, the Dow was down over 600 points so some institutional investors panicked.
Institutional investors are well-paid to be right, and because they are judged as often as every day, they have to be right all of the time. When the market makes a big move down, no institutional investor wants to have to explain why they didn't do any selling. I think the reason market downturns tend to accelerate after the Dow has already dropped 500 or so points is that institutional investors want to get some sales on the books to show that they were on the right side of the market for the day.
You can take advantage of the big dips that occur when institutional investors panic. But you'll need to steel yourself to buy stocks when the news is scary.
Yesterday, when the Dow was down about 500 points I looked at the stocks my best managers had made their biggest position.
Two of the most compelling stocks, in my opinion, were Facebook and AMD. In late December, about a month after Robert Frazier added to his position, I made Facebook a 10% position in my bear market portfolio at $133. At yesterday's price of $190, Facebook had already appreciated by over 40% so I did not add more. However, I still recommended Facebook because if I didn't already own it, I would have bought it yesterday.
I have been following AMD since Tony Mitchell told me in 2018 how Intel's CPU vulnerabilities would affect AMD's market share. AMD gained nearly 69%, the second-best performing stock in the S&P 500 for 2018. It's rare that that kind of performance can repeat itself, but Tony is convinced that it can. Yesterday I put 2% of the bear market portfolio in AMD at $26 and change.
My Take: Since I started the bear market portfolio in late December, I've put 10% in each of Facebook, Nvidia, and Apple. I've also made two buys of Tesla committing 2% each time. With each trade, I've published an article to explain my reasons on the record. With yesterday's 2% purchase of AMD, I've bought $36,000 worth of stock for the bear market portfolio which is now worth $43,819.
Tony Mitchell and Robert Frazier are both up about 30% year-to-date. I would have done better had I just invested in either of their portfolios instead of cherry-picking their portfolios.