Wall Street mounted a relief rally Tuesday, following three straight sessions dominated by the woes of now-collapsed Silicon Valley Bank. Confronted with the ensuing spike in market volatility, we sought to be discerning with our Club portfolio and, eventually, opportunistic in stocks that we felt unreasonably sank. The S & P 500 climbed roughly 1% in afternoon Tuesday trading, clawing back only some of its 3.4% decline between Thursday and Monday’s close. Regional bank stocks — pummeled in recent days on SVB contagion fears — led the rebound. Some saw double-digit percentage gains like First Republic Bank (FRC), up around 30% Tuesday after cratering 73% in the previous three trading days. Tuesday’s market bounce could also prove short-lived, particularly if the Federal Deposit Insurance Corporation (FDIC) cannot find a firm to buy Silicon Valley Bank. But when emotion rules the day on Wall Street, and broadly drives stocks down, favorable situations for diligent investors can arise. Here’s a recap of this week’s trades and how we view the market landscape. We spent Monday morning looking for things to buy in what our trusted S & P Oscillator signaled was an oversold market. As Jim often says, no one ever made a dime by panicking ; it’s not an investment strategy. Neither is indiscriminately buying every stock in our portfolio in a situation like this. Around noon ET, we alerted members, keeping with Jim’s Sunday night commentary , that we were putting some of our large cash position to work and buying Estee Lauder (EL) and Pioneer Natural Resources (PXD). In the three sessions Thursday through Monday, both stocks underperformed the S & P 500 as they fell 5.4% and 4.4%, respectively. But our conviction in both companies didn’t dry up. If anything, in the case of Pioneer, the oil-and-gas producer’s robust annual dividend yield of roughly 11% increased in attractiveness following the recent slide in bond yields. Estee Lauder and Pioneer were both taking part of Tuesday’s rally, climbing more than 2% and 1%. Monday evening, we recommended further patience on Wells Fargo (WFC), citing elevated uncertainty around the banking sector. By contrast, we felt a bit more confident in Morgan Stanley (MS) because it’s a different kind of financial firm. It’s less reliant on deposits and loans as it pivots toward asset management, which provides stability to earnings and decreases its reliance on volatile investment banking revenues. Wells Fargo rose about 3.5% Tuesday, while Morgan Stanley gained roughly 2% CAT YTD mountain Caterpillar (CAT) YTD performance Before Tuesday’s market open, we announced another purchase of a beaten-down stock, adding to our position in Caterpillar (CAT). The manufacturing giant was one of the worst-performing Club names over the past three sessions, sinking nearly 10% as of Monday’s close. Only Wells Fargo, down 12.4%, and Halliburton (HAL), down 10.2%, saw bigger declines over that stretch. While some analyst downgrades…
Read More: Here’s how we navigated SVB-sparked chaos and Tuesday’s bounce