Investing Update: Why I'm Buying This Dip
What I'm buying, selling & watching
This week would sure classify as a roller coaster ride in the stock market. The rise in volatility started on Black Friday with the announcement of the new covid variant Omicron. Everyday was a whipsaw, up and down.
These two charts show how bumpy the market has been since Black Friday. You’ll notice things were moving along on a nice smooth path. But we all know that never lasts very long. Something always comes up to crash the party.
The first one-year chart shows the jump in the VIX (Volatility Index). The VIX closed over 30 on Wednesday. The last time the VIX was over 30 was back on January 27th and 29th of this year.
Here is the S&P 500 chart for the past month. As you can see things really began moving on Black Friday and have not slowed down since. The S&P 500 year to date return is 22% and the 5 year return is just over 100%.
The last chart I want to share was posted by Brian Sullivan from CNBC Thursday. It really shows how closely correlated the Omicron variant news selloff compares to when the Delta variant discovery was announced back in August.
It really makes me wonder how much of the selling and roller coaster movement is actually the computer algorithms moving the markets. With the stock market always seemingly a forward looking mechanism, we can now assume that the volatility of a new variant is priced in.
My feeling was this was an overreacted selloff. Other than the Omicron fears not much else has really changed in risk to the overall market. Inflation is still here and the 10-year Treasury rate has still maintained its same range.
It felt to me that the market was looking for an excuse to pullback. I viewed this as a very short term pullback and put money to work. In this high inflation environment I do not want to have much cash for very long and feel that you have to be invested in equities.
Weeks like this reemphasizes being disciplined and focused on the long term. These are two things that people really struggle with. Keep in mind that the S&P 500 is up 73% of the time over the long term. As the volatility and uneasiness increases that is the time for long term investors to find opportunities.
Moves I’ve Made
Airbnb (ABNB): In my last investing update I had said this about Airbnb.
It kept staring at me in the $160s for the longest time and I just couldn’t pull the trigger. Well I kick myself now.
Well this week Airbnb got sold off quite hard in reaction to the new variant due to it being in the travel and leisure sector. Since I feel this was an overreacted market selloff to a new COVID variant I bought Airbnb. I started my position at $169. It fell a little farther and I added a little more at $165.
This short term blip in variant activity does not have a long term impact on the value of Airbnb. I feel like I got a Black Friday deal on this stock.
This is why you always need to have your shopping list together and updated with prices where you want to buy certain stocks at.
Coinbase (COIN): I’ve increased my position in Coinbase at $267. This is my continued play on cryptocurrency.
Disney (DIS): One of the most beloved American companies Disney, is not feeling the love with its stock price. It has gone down in a straight line. This is one of my oldest and longest holdings. Again like Airbnb some react as if people will never go to experience any of Disney’s theme parks again. I added to my position at $144.
Shopify (SHOP): I added to my Shopify position at $1395. My position is getting to the size I want to have it at. Whenever I think Shopify, I think Small Businesses success. One of my favorite long term stocks.
Square (SQ): Another of my favorite stocks has been absolutely hammered. After its name change to Block and with CEO Jack Dorsey stepping down as the CEO of his other company Twitter, the stock continued to slide. I added to my position at $182.
CrowdStrike (CRWD): I had a sell stop limit order in at $227.50. It hit that level so my position did get trimmed. It continued to fall and I decided to buy some shares back at $195. Which was down about 15% from where I had sold some at. The best play on cybersecurity in my opinion and I feel this it’s oversold after another great earnings report this week.
What I’m Watching
I have my eye on the overall market. Mostly the large tech stocks. The overall market has not experienced the steep selloff pain that a lot of individual stocks have experienced. It seems the FANG stocks have been the pillars that are keeping the overall Dow, S&P 500 and Nasdaq from falling at the same pace many stocks are. They’ve done this before and I want to see if they continue to do so.
If these start to fall along with the rest of stocks it could make for an interesting end of the year. We’re usually talking about the Santa Clause rally at this point of December and if that is to occur, big tech is going to lead that rally.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion.