The Blue Light Sale After Crashes

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When the markets crashed hard in 2008/09 and then again in March of 2020, the rebounds that followed were nothing less than spectacular. Those that bought into the teeth of crash or right after either event, likely saw their balances soar. 

Not a recommendation to buy stocks during crashes or anytime for that matter, investors can consider the absolute hammering certain stocks have had since the start of 2022. The technology-heavy Nasdaq stocks actually started eroding mid-November, with the more pronounced sell-off starting around the first week of January. 

Some of the popular stay-at-home stocks, as I called them, have been absolutely creamed, with some stocks off more than 80%. 

Although no one can forecast market direction at any time, and markets can go a lot lower or higher than one might think and for longer than one might think, one has to consider some investors bought many of these stocks at much higher levels before the crash, and although many of these companies have seen their revenues drop as the country came out of the shutdowns, did these companies deserve the incredible haircuts they saw in their stock prices?

Much like after 2008/09 and March 2020 sell-off, it takes guts to start shopping in the garbage heap of obliterated stocks in the face of the negative sentiment surrounding such carnage.

But much like a clearance sale at your local retailer, one could make a case that if people loved these stocks at triple the price, why would one hesitate to buy these same companies at a fraction of the price they were such a short time ago?

After all, although earnings may have taken a hit for some of these past Wall Street darlings, are the companies still strong and viable entities with good products?

Many are. 

Although some of these companies might indeed go four feet up in bankruptcy sometime in the future, many of these companies are not going anywhere and will survive and even thrive in the months ahead, and some stocks might even surpass their previous highs.

As is common in massive sell-off events, many a baby is thrown out with the bathwater, as previous high flyers turn into the most hated stocks on Wall Street.

It is said to buy when there is blood in the streets, and certainly, some sectors and individual stocks are gushing red. 

Like super stock rally events, many stocks go much higher than thought possible, and during horrific crashes, many stocks get way oversold to the point of ridiculousness.

Although bottom fishing can be a dangerous business, I like to nibble on beaten-up securities during severe market sells off, garnering the cash for such buys when stops are hit on some of my stocks on the way down. 

Stops are predetermined sell orders I have installed during the rallies to try and protect my profitable positions. As the stocks I may have bought go up, I set the sell points higher and higher, known as a “trailing stop” in an attempt to retain any profits I may have. 

Although stops and trailing stops don’t guarantee that gains or losses will be controlled, when executed properly, they can provide some comfort and react accordingly during market sell-offs.

Then as the market continues down, I use cash from any sales to slowly add some stocks that were badly hammered when the obliteration levels reach, at least in my mind, the point of ridiculous. 

Although prices may continue to drop, at least I know I am buying hopefully some good companies at much lower prices during the “blue- light-special fire sales” event that severe market crashes present.

This article is opinion only of Marc Cuniberti, and may not represent those of this news media and should not be construed as investment advice nor represents the opinion of any bank, investment or advisory firm.  Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access or monitor client funds, accounts, or portfolios.  Contact: (530)559-1214 or [email protected]

Marc Cuniberti

Marc Cuniberti

Marc Cuniberti hosts Money Matters Financial Radio and the Money Management Radio on KVMR FM and is carried on 67 stations nationwide. He is a financial columnist for the Union News and half a dozen newspaper publications. Marc holds a degree in Economics with Honors from San Diego State University. He is a registered financial advisor for Vantage Financial Group in Auburn, California. He holds California Insurance License 0L34249 and is the owner of BAP Inc. Insurance Services. He also owns Bay Area Process Inc., an engineering and services corporation. He is the founder and producer of the video series “Investing in Community” carried on NCTV and on hundreds of social media sites. He is also the founder and administrator of Money Matters, Investing in Community Video Series, Fire Insurance Information and Inquiries, Daily Laughter and Inspiration and Nevada City Peeps Facebook pages. He has appeared on NBC and ABC television and the subject of a host of TV documentaries for his financial insights, successfully calling the banking and real estate implosion of 2008 two years before it occurred. Marc holds a teaching certification in Tang Soo Do Korean martial arts and is a former big brother for the Big Brothers Big Sisters program in Nevada and Marin Counties. He is presently media consultant for the IFM Food Bank of Nevada County.