In my recent Flash Alert, emailed 3/15/23 to Joe Duarte in the Money Options subscribers I offered a thorough update on the current market as well as providing actionable recommendations about our current portfolios.
In this post, I will look to the future. That’s because at some point, all this selling will be over and there will be some very attractive stocks to buy.
The stocks in this post are on my shopping list at the moment, but are not guaranteed to make it to my portfolio. Nevertheless, their inclusion here is to provide insight into how I think when I pick stocks and manage my portfolio.
Getting A Grip
What I’ve learned when these market debacles occur, such as the current “banking crisis” is that acting hastily enhances my chances of losing money. So aside from being prepared, as I noted here when I described the possibility of an upcoming liquidity crisis, I always ask one simple question: What’s changed?
The simple answer, when applied to the stock market is that stocks are going down because the Federal Reserve was too aggressive, for too long, in raising interest rates. The video linked above expands on that topic and offers practical solutions to handle market adversity. During volatile markets I do two things: hedge my portfolio and build a shopping list.
Moreover, aside from asking that important question about the market I ask it regarding individual sectors of the market.
Two Tech Stocks Worth Keeping an Eye On
Here’s an example of how this works for market sectors. I ask what’s changed in the semiconductor sector? And why are some of the stocks in that area of the market holding up when everything else is falling?
The answer to the semiconductor question is best answered by looking at two stocks on my shopping list: Lattice Semiconductor (LSCC) and Texas Instruments (TXN).
First, let’s look at Lattice, whose shares remain near their recent highs after beating their earnings expectations and offering very upbeat guidance for the year. So far, the market is not losing confidence in the company’s ability to beat expectations further.
That's because Lattice makes semiconductor programmable arrays. Those are generic chips that can be programmed by each individual company for whatever purpose is required. Thus, equipment manufacturers like to have an oversupply of them just in case there are shortages or quick changes to products need to be made. And in tough times these chips make the manufacturing process easier for equipment manufacturers.
My point is that when the market is crashing and a stock holds its own, there is something worthwhile happening at that company, and I will look for an opportunity to put it my portfolio.
Currently LSCC is priced for perfection. And in a bad market, such as the one we are in now, the stock could become victim to panic selling by investors who have to meet a margin call or maybe an insider who is trying to cash in just in case. That’s why I’m not diving into the shares.
But if they come down in price and hold above their 50-day moving average I will be taking a closer look.
In the case of Texas Instruments (TXN), the story is a bit different. That’s because TXN is always on my shopping list because they are such as well run company, which makes money even in the worst of times.
Of late they’ve been modestly under promising and over delivering more than usual. But the stock has been in a trading range with good support near $170.
Again, I am a bit leery of buying the stock because of the general state of the market. On the other hand, if the stock remains stable it may become a good candidate for an option strategy such as a Buy/Write (selling a call) or even selling a put in order to collect income.
Bottom Line
Market declines eventually reverse. They offer great opportunities to build a shopping list.
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Until next time.
Joe Duarte