I’ve been at this a long time. My career began with an independent sell-side research firm in 1997, but I started investing in the early 1990s while I was in college, using leftover money from my student loans and part-time work to send $25 per month to American Century’s (then 20th Century) Ultra mutual fund.
Consistency paid off. I contributed every month, and regularly increased my contributions alongside raises. Once I began working off Wall Street helping professionals manage money, I refined my approach. Over the past 30 years, I have learned that raising cash during good times provides the financial firepower to take advantage of inevitable bad times.
This strategy, which is also embraced by billionaire Mark Cuban and many others, has treated me kindly, including in 2020, when having cash to deploy during the Covid collapse allowed me to generate a 100% annual return, and during 2025, when the software sell-off allowed me to pick up some top stocks on sale.
There’s no telling if this recent sell-off, which has seen many top technology stocks collapse by over 50% since summer, will similarly be rewarding, but after going to 40% cash in my account in September, I couldn’t resist buying some stocks on November 5, when the Nasdaq tumbled over 5%.
Nobody nails the bottom during a sell off
Picking bottoms in the stock market is risky business, and if I’ve learned anything, it’s that the best way to take advantage of weakness is to sprinkle buys over time, rather than go all-in on any particular day.
The reality is that the market is fickle, and stocks can fall much further than anyone expects. It’s also true that stock sell-offs happen faster than rallies, as investors react emotionally to weakness, causing a cascade — like we just saw — that can send leaders down double digits very quickly.
Related: 5 tech stock stalwarts have tumbled over 50%
When I was younger, I used to think in absolutes — all in or all out. Now that I’ve got more grey hair, I’ve learned a better approach is to sell out of stocks into rallies and leg into stocks into sell-offs.
With the S&P 500 down over 4% and the Nasdaq falling over 5% on November 5, I was compelled to put a little of that cash I raised in September to work, but that decision wasn’t made in one day, but over the span of weeks as the market eroded, leaving the Nasdaq 100 about 15% off its early October high.
My plan from here, subject to market dynamics, is to use any weakness on November 6th to buy more, but I don’t expect a straight-line higher. If market strength early today rolls over by the close, we could see more selling Monday or Tuesday.
In short, I plan to continue using weakness to my advantage over the coming weeks: if rallies stall at resistance, I will bring my equity weight back toward 100%.
To be clear, this approach won’t let me ‘nail the bottom,’ but if things pan out, it will allow me to establish larger positions in beaten-down stocks at favorable prices.
If things don’t pan out, I can sell what I just bought at small losses, reboot, and try again.
Doubled-barreled bottoms are best, but we’re not there yet
My research model was built in 2003, and it’s helped me navigate the Great Financial Crisis, COVID, and 2022’s bear market. It isn’t perfect, but it does often provide insight that has proven very valuable. For instance, during the tariff tantrum, it flashed a very rare ‘double-barreled’ buy signal.
We’re not there yet. A double-barreled buy means that the average score I give to the 1600 stocks I track falls below 50 at the same time that the percentage of stocks in my universe trading 5% above the 200-day moving average falls below 20%. That setup occurs only at the most severe points, and we’re not there yet.
Related: SanDisk stock plunges 20% as AI selloff deepens despite strong earnings
As a result, I won’t be as aggressive now as I would be during a ‘double-barreled’ signal, and I’ll keep some powder dry for additional buys if the bottom falls out and we do indeed move into a more painful drawdown.
What I bought, and why
While tempting to buy individual stocks that have retreated sharply, largely in technology, my approach today was to simply buy the exchange-traded funds for broad-based exposure.
I did double my position in SanDisk, picking up shares around $808. SanDisk shares have fallen 57% since September 22, yet DRAM memory prices remain sky-high and capacity constrained, making today’s 20%+ decline actionable, at least for now.
Still, that was a relatively small trade on the margin. Instead, I focused on the S&P 500 ETF (SPY), the Nasdaq-100 ETF (QQQ), the State Street Technology Select Sector SPDR ETF (XLK), and the VanEck Semiconductor ETF (SMH). Historically, I’ve found that buying the S&P 500 on down 4% days can be rewarding short and long term (intermediate term is more a question mark).
That thinking is backed by data from Bespoke, which sent me a report today showing that, historically, average S&P 500 returns following down days of 4% or more have been positive.
“Historically, the index has averaged a gain of 2% over the next month and 6.7% over the next three months,” noted Bespoke.
Of course, past performance guarantees nothing, but history often rhymes.
I don’t know if we’ll have more days, weeks, or even months of weakness, but I do believe that extreme moves can often create reversals. I’m not alone in that thinking.
Doug Kass is a hedge fund manager with 50 years of experience, including as Director of Research for billionaire Leon Cooperman’s Omega Advisors. In his daily trading diary today, Kass similarly switched gears from bearish to bullish, picking up shares in the beaten-down indexes on November 5.
What would get me to buy more aggressively? As our own Charley Blaine wrote, a relative strength index, or RSI( 14), in buy territory below 30, especially if we see a put/call option ratio above 1.20 and a volatility index (VIX) reading near 30, and obviously, a double-barreled buy signal.
Todd Campbell owns shares in SPY, QQQ, XLK, SMH, and SanDisk.
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