Investors shouldn’t ‘bottom fish’ purely based on how low a stock has tanked, says one veteran strategist.
“I wouldn’t just try to bottom fish a disaster, simply because a stock has gone down a lot,” Liz Ann Sonders, Charles Schwab chief investment strategist told Yahoo Finance Live.
“In an environment like this where growth has slowed, we’ve got negative earnings revisions ratio, you’ve got the valuation issues that come into much more clarity when you’re in a tightening cycle,” she added.
The divergence in stocks is notable over the last three months, since the Federal Reserve started tapering its balance sheet.
Stocks, including Netflix (NFLX), Meta (FB), PayPal (PYPL), Affirm (AFRM), Draftkings (DKNG) and Roku (ROKU), are just some of the stocks which tanked by double digit percentages–in some cases their worst declines ever–in the aftermath of their latest quarterly results and outlook.
Facebook, Meta and TikTok logos are seen in this illustration taken February 15, 2022. REUTERS/Dado Ruvic/Illustration
“I don’t think any area in the market … should be viewed with a monolithic lens. I think that’s one of the mistakes that investors could make this year,” said Sonders. ‘The only thing you’re using is a drawdown percent. i think what we’re seeing is more discernment in terms of investors,” said Sonders.
“Even among the FAANG-type stocks, the big five, the super seven, the big eight … huge divergencies in terms of how they’re performing. I think that’s going to persist,” added Sonders.
“I think quality value fundamentals matter.”
Ines is a markets reporter covering stocks. Follow her on Twitter at @ines_ferre