Many growth stocks have been hit hard during this sudden market sell-off. For evidence of the carnage, look at the tech-heavy Nasdaq 100, which is down 21% since mid-February.
This can be scary for investors, especially newer ones not used to this sudden level of panic. Right now, there are alarming headlines across the financial media. These can make the fear worse, resulting in even more selling pressure.
What’s going on?
I’m sure most readers are familiar with the basics by now, but they’re probably worth repeating.
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There are four interconnected concerns:
- The Trump administration’s sweeping tariffs have the potential to spark an all-out global trade war.
- Inflation could spike higher, putting pressure on consumers and businesses alike.
- The chance of a global recession has risen.
- Company earnings could fall sharply.
Given this toxic cocktail, it’s hardly surprising that a lot of investors are fleeing for the hills.
My reaction
Many of my holdings have fallen 20% or more in a matter of days. So how am I dealing with this? Well, the first thing is to not think about them as stocks, but rather as businesses. Because that’s what they are — small ownership stakes in real businesses.
So I ask myself, do I still want to own a small part of this business for the next five to 10 years? If the answer is yes, then I’m certainly not selling today, especially for 20% less than last week.
The next question I’m asking myself is, do I want to own more of this particular company while its stock is suddenly lower? The answer to this will depend on a number of factors, including how much I already have invested in it and what the valuation is.
In hindsight, the last market crash (Covid 2020) ended up being a great time to invest. But it would be naïve to assume that all stocks are dip-buying opportunities right now. It’s probably too early to start loading up the truck on any one sector when the market could still fall further.
Going shopping
What I’m going to do is add opportunistically to strong companies that have been battered in my growth portfolio, starting with Shopify (NASDAQ: SHOP). Its market-leading platform enables millions of merchants of all sizes to sell stuff online.
As I write, the stock is down 41% since mid-February!
I should say this reflects real concerns about inflation and a potential US recession, which wouldn’t be ideal for e-commerce, to put it mildly. Many merchants could struggle badly, hurting Shopify’s growth trajectory.
However, this is a company whose competitive position appears to be getting stronger. In 2024, revenue jumped 26% to $8.9bn, which was three times higher than 2020. This tells us that the growth engine remains strong, even after the pandemic-fuelled online shopping boom.
Meanwhile, the company is strategically investing in artificial intelligence (AI) — remember that?! — to enhance its platform. President Harley Finkelstein said in February that he thinks “Shopify will very much be one of the major net beneficiaries in this new AI age“.
Finally, the forward price-to-earnings ratio is now 39, based on current forecasts for 2026. While not cheap, that’s a significant discount to the stock’s historical average.
Shopify is one holding I plan to add to in the coming days.
