After a devastating week on the stock market, it looks like a recovery could be on, but is it too late to buy into the dip?
So much for that correction, am I right?
After seven days that would turn even the most stoic investor into a doomsdayer, the stock market seems to be rebounding from its worst week since the 2008 economic crash. The Dow (INDEXDJX: .DJI) rose more than 5%, the S&P 500 (NYSEARCA: VOO) 4.6%, and the Nasdaq (INDEXNASDAQ: .IXIC) 4.5%, as fears over the coronavirus’s impact on the economy abated somewhat. There is still some way to go for the market to fully recover, as the Nasdaq still sits 9% off of its 52-week high, with a glimmer of hope for investors.
However, with stocks such as Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) soaring on Monday, has a unique buying opportunity passed investors by?
For more information on current events in the market, we suggest the following:
Which stocks are up today?
Apple (+9.31%) and Tesla (+11.32%) were not the only big names that rebounded on Monday, as many more of our favorite stocks recovered from last week’s rout:
- Costco (NASDAQ: COST) jumped nearly 10% ahead of its Thursday earnings call, which is expected to report a boost in sales as shoppers clamber to stock up in case the coronavirus escalates.
- Social media giant Twitter (NYSE: TWTR) rose nearly 8% after investment group Elliott Management stepped in with a $1 billion stake in the company and reportedly wish to oust CEO-founder Jack Dorsey, who is also CEO of payment-software Square (NYSE: SQ).
- Despite downgrading its guidance last week, Microsoft (NASDAQ: MSFT) has also seen its stock recover nearly 7% as investor panic subsides concerning the virus’s potential impact on sales in China.
- Even the more volatile ‘hype-stocks’ such as Virgin Galactic (NYSE: SPCE) and Beyond Meat (NASDAQ: BYND) have rebounded more than 5% and 7% respectively. Despite Virgin reporting a loss of $55 million at last week’s earnings report, it still seems that investors want a slice of Richard Branson’s space-travel leader. Meanwhile, Beyond is benefiting from a potentially groundbreaking partnership with coffee giant Starbucks (NASDAQ: SBUX).
Overall, the market is looking to be in much better shape than it was this time last week when the Dow dropped more than 1,000 points in one day. But have many investors missed the boat on discount stock prices?
Did we miss the boat?
The great thing about the stock market boat is that it never docks. There is never a right or wrong time to invest in a company if you truly believe in it.
The past week saw many of the market’s favorite stocks fall. To many investors, this may seem like a disaster, but to others, it represents a wonderful opportunity to get stock at a cheaper price. Anyone interested in travel stocks such as Delta Airlines (NYSE: DAL) or Wynn Resorts (NASDAQ: WYNN) can get shares at much lower prices than they were 2 months ago. The same goes for any stocks affected by the coronavirus or the wider stock market sell-off in general.
The coronavirus will likely have a short-lived effect on the market, and when the dip properly ends, these companies that fell will still be the same companies they were before the virus hit, so it’s important to recognize the long-term opportunity presented by a coronavirus-related drop.
Is it still a bull market?
In the iconic words of ’90s hip-hop artist LL Cool J: ‘Don’t call it a comeback, I’ve been here for years.”
It’s hard to say whether one can classify the market’s slight recovery on Monday as a ‘comeback’, considering it was but one bad week during a decade-long bull market. Some of the hardest-hit stocks such as Apple and Microsoft are up more than 120% and 280% respectively in the past 5 years.
If anything, the market is reacting to investors who believe that this bullish decade has run its course and that a recession is on its way. This is the same conversation that has been had at this time of year, every year for the past 3 years. The only difference is that now, the market has the coronavirus as an excuse for a sell-off.
I will allow MyWallSt’s head analyst Rory to put this into context:
In April 2009, there was an outbreak of influenza-like illness in Mexico and, shortly afterward, the United States. In June, the World Health Organisation declared a global pandemic. In October, President Obama declared it a national emergency. H1N1 is estimated to have killed around 18,000 people. What happened to the stock market in that time? It went up — around 40% between April 2009 and May 2010. In 2009, the market was desperately trying to recover from one of the worst drops in history. It didn’t care about a virus outbreak. Up until last week, we were looking at the longest bull market in history. This time, the market does care.
The above extract is taken from MyWallSt’s Stock of the Month report for March. Every month, our Head Analyst Rory picks one stock that he believes is ripe for buying, and so far, our Stock of the Month picks are up nearly 68%, versus the S&P 500’s 37% in the same time frame. If you wish to get a free rundown on one of Rory’s top Stock’s of the Month, just pop your email into our list below:
Long story short, there is no way to predict the market, but trying to could result in some epic losses because the only tried and proven method for investing is ‘buy and hold’.
Here at MyWallSt, we have six golden rules for investing:
1. Get started: No matter how big or small the investment.
2. Think long-term: The buy and hold philosophy outperforms the market in the long-term.
3. Never borrow to buy: Save first, then invest.
4. Diversify: Accumulate a minimum of 12 stocks across 6 different sectors.
5. Buy what you believe: Own part of a business you love.
6. Invest What You Can, When You Can: Get your saving habits right.
If you follow these rules, then weeks like last week should not be cause for concern, but present a unique buying opportunity at a discount price.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.