Navigating the Tariff Sell-Off: A Weekend Plan
Just like after a storm on the beach, the best opportunities emerge after a market sell-off.
After two days of grueling markets, the weekend is a good opportunity to catch our breath and reassess.
I’ll keep this brief as I know you also have a lot going on.
Here are three things I’m doing this weekend in response to the tariff-driven sell off.
First, relax.
I know this isn’t easy, but the knee-jerk response to stress is to take an action - fight or flight.
Start buying, start selling, start switching horses mid-stream. We want to take an action.
It is hard, mentally and emotionally, to slow down and take deliberate action during a crisis. As humans, we’re not wired that way. If we were, our species wouldn’t have survived very long in the wild.
I’m reminded of one of my favorite quotes from the Netflix series The Crown between a young Queen Elizabeth II and her grandmother, Queen Mary.
Queen Elizabeth II: But surely doing nothing is no job at all?
Queen Mary: To do nothing is the hardest job of all. And it will take every ounce of energy that you have.
Step back from the madness. If you’re going to take an action, be deliberate in that action.
Second, re-underwrite the portfolio
Some things may have changed this week. It’s worth asking yourself these questions and others as you evaluate your portfolio.
Does the tariff news impact the company’s economic moat? Is the company easier or tougher to compete against now?
Is this a company I want to go through a potential storm with? Are they led by thoughtful stewards of capital?
Does the company have the culture to adjust and adapt to new realities?
Is the balance sheet strong enough to enable management to capitalize on opportunities?
Ideally, the answers to these questions would have been “yes” before the crisis, but a healthy re-evaluation is valuable just the same.
Consider ranking your portfolio names based on your assessment.
If you’re looking to raise cash in your portfolio, the companies that score the lowest on the assessment should be your first options to go.
Finally, looking for opportunities
I often use the analogy of going seashell hunting with my wife, who is an avid beachcomber. The best time to look for seashells is not after a week of 80 degrees and sunshine when tourists have picked everything over. No, the best time is after a storm when the raging sea has tossed up its treasures.
Now is one of those times.
Could it get worse? Sure. But anytime investors indiscriminately sell, it’s a good time to go hunting.
I’m revisiting the list of profiled Flyover Stocks (here’s a free example of a company profile), some of the stocks on my watch list, and getting up to speed on new ideas using Tenzing MEMO, an AI-driven research platform that I talked about here. (Professional investors can use a discount code FLYWITHUS to get a free trial and discount at MEMO.)
Market sell-offs can provide an opportunity to upgrade your portfolio’s quality. I know that the best performing stocks when markets turn again will likely be lower quality companies, but I’m willing to give up some of that initial sugar rush to buy better companies that I aim to own for decades.
Happy hunting.
Stay patient, stay focused. (Premium Flyover Stock members, stick around for more information.)