The last few weeks have been pretty brutal for many investors, myself included. Plenty of technology stocks I own, including the likes of Amazon, Nvidia, and Shopify, have fallen 20%+ in the blink of an eye.
Here, I’m going to explain how I’m handling this stock market crash. With share prices plummeting, these are the moves I’m making now.
I’m looking for top stocks to buy
The first thing I’m doing in this environment is creating watchlists of high-quality stocks I want to buy.
You see, while many investors are in ‘sell’ mode right now, I’m going against the crowd and looking for top stocks to snap up. Twenty years of investing has taught me that the best time to buy stocks is generally when there’s panic in the air. And right now, there’s definitely signs of panic. Yesterday, the FTSE 100 index was down 2.6% while the S&P 500 was down nearly 4% at one point. These are big falls.
My watchlists aren’t anything overly complicated. I simply put together a list of stocks with their current share prices, the amount in percentage terms they’ve fallen from their 52-week highs, and their valuations. I’ve provided an example below.
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This kind of watchlist helps me quickly spot opportunities. Within seconds, I can see what stocks have been hammered the most, and whether there’s value on offer.
For example, looking at that list, PayPal stands out to me. It’s down more than 50% from its 52-week high and currently trades on a P/E ratio of less than 30. That strikes me as an opportunity, given the company’s market position, brand name, user base, and growth potential.
Alphabet (which owns Google and YouTube), on a P/E ratio of 22.3 times, also looks like an opportunity to me. It appears set to grow significantly in the years ahead on the back of growth in digital advertising, cloud computing, and artificial intelligence. A P/E ratio in the low 20s also strikes me as a bargain.
I’m buying stocks NOW
The second thing I’m doing is drip-feeding money into the market slowly. The reason I’m taking a cautious approach, and not loading up on stocks, is that share prices could potentially fall further. So I want to keep some powder dry for the future.
As for what I’ve been buying, it’s mainly been Big Tech companies as I’m very bullish on these from a 10-year view. In the last week, I’ve added to my positions in Microsoft, Alphabet, Amazon, and Nvidia. However, I’ve also had nibbles at some smaller tech companies that are benefiting from the digital revolution, including Intuit, Kainos, and Volex.
In hindsight, I’ve been a little bit early with a few purchases as they’ve continued to fall. However, that doesn’t concern me too much, as it’s extremely hard to pick the bottom when stocks are crashing.
While stocks could go lower from here, I’m relatively confident that, in the long run, my purchases will pay off as the world becomes more digital.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns Alphabet (C shares), Amazon, Intuit, Kainos, Microsoft, Nvidia, PayPal Holdings, Shopify, and Volex. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Kainos, Microsoft, PayPal Holdings, and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
