With high inflation and a global economy in disarray, now doesn’t really seem like the perfect time to invest in stocks. After all, the market has already lost nearly 14% of its value this year and its short-term future is extremely uncertain.
But if there’s one thing the smartest investors know, it’s that market madness is no excuse to stay away. For them, it’s a call to take calculated action to support the value of their portfolio over the long term. In particular, there are three things they’re going to do right now and in the months to come to make sure they come out on top.
1. Stay Cool Even When Favorites Are Down
Perhaps the most important thing that the smartest investors do that average investors often don’t do is keep their wits about them when their positions don’t go their way. It’s easy to say that people shouldn’t panic to sell, but when you’re faced with your hard-earned cash flowing out, it’s also pretty easy to get rattled. And once that happens, they tend to start thinking about selling their stocks, even when it would be at a loss, and even when the losses could go a long way with enough patience.
Worse still, when investors sell their stocks at a loss when the market is unstable, it is often without considering whether their investment thesis is still valid, which is also generally bad practice.
For example, both Intuitive surgery (ISRG) -0.16%) and Wholesale Costco (COST 0.95%) have fallen this year so far, with Intuitive losing 36% and Costco down 5%. But both companies are still profitable and have grown their 12-month revenue by more than 40% in the past three years.
More importantly, neither has changed anything fundamental to its business model and its operations have not been directly affected by the current market volatility. Intuitive Surgical still manufactures robotic surgical systems, and Costco still sells bulk consumer goods and groceries from its warehouses. The same forces that drove their growth before the bear market are still in play today, and savvy investors know that there is a good chance that the pair will rally over time due to the constant release of favorable profits, as before.
2. Lean on high conviction posts
In line with this theme, another thing the best investors do is buy more shares of their favorite companies, even when the future is uncertain. After all, if your investment thesis still holds, why not take advantage of the dips and add to your positions?
Take Intuitive Surgical, for example. At the heart of the company’s appeal to investors is the fact that for every new da Vinci surgical suite it installs in operating rooms around the world, it gets a multi-year revenue stream. from the sale of maintenance contracts, training programs, software, spare parts and updated surgical tools for the robots. And when its customers use their ORs for more procedures, they tend to need more services and accessories, so they also benefit from the growth of healthcare systems.
Because of this razor and blade business model, approximately 75% of the company’s revenue came from recurring sources in 2021, a proportion that is slowly increasing over time.
Does market turmoil affect any element of Intuitive’s narrative? No. So while the smartest investors would likely check to see if other important factors are eroding their investment thesis for the stock before buying more shares, they ultimately wouldn’t hesitate to strengthen their position here.
3. Buy bargains or likely future winners from watchlist stocks
Most accredited investors maintain a watch list of stocks they would like to buy. Then, during periods of market volatility, they look for opportunities to start new positions in the stocks they are watching, either for the right price or because of positive developments in economic phenomena. At present, inflation is the economic phenomenon of the dayso one thing that smart investors might look for is companies that could benefit.
Costco fits that bill pretty well. Since the wholesaler’s reputation rests on providing its members with the cheapest products, if consumers feel the pain of inflation, they are unlikely to do much better than keep buying. his products. Also, if other retailers end up increasing their prices faster than Costco, it’s plausible that they are increasing faster than normal.
According to its June sales results for this year so far, Costco’s revenue was 16.9% higher than the same period in 2021, so this trend may well be happening. In other words, if the stock was on a savvy investor’s watchlist, they would likely be willing to buy the stock at a slightly higher price than usual when bargain hunting. And in the long run, it would help them earn strong returns, unlike investors who were too scared to jump into an attractive stock at a better price than last year.
