Why Some Investors Welcome Down Market Conditions

In this segment of “The Morning Show” on Motley Fool Live, recorded on Dec. 13, Fool Senior Analyst Jim Gillies and Director of Small Cap Research Bill Mann discuss the recent market dip as a favorable opportunity for investors.

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Jim Gillies: if you are approaching this as a long-term sport, if you are, I think, approaching it with the proper mindset, which is portfolio returns, not individual stock returns. A stock as a part of your portfolio, portfolio returns are what matter. It becomes a case of portfolio construction and what do you have in your portfolio to mitigate the high-growth names.

I think you welcome days like these, I think you welcome market conditions like this. Because you get a chance to buy your favorite companies, assuming you can make at least a reasonable attempt at what is it worth and why.

You believe that the company at today’s much beaten down price is a reasonable number to look for. These are the market conditions you want. You want stocks being sold off because you’re getting a better price.

I’ll throw a name out there. It’s a name I get asked about all the time. It’s a higher-risk name even at this level, but AcuityAds, been slapped around. AcuityAds (NASDAQ: ATY) at four dollars and change is a) still growing and b) at 12 times cash flow, and has a $100 million in the bank. For a company, that’s what? $300 million market cap.

But you look at the 52-week high and you look at how much it’s been beaten down. To Jim’s earlier point, you run away or your inclination is to run away.

Bill Mann: Your inclination is to assume that the market is right.

Gillies: Yeah. What if it is not?

Bill Mann has no position in any of the stocks mentioned. Jim Gillies owns AcuityAds Holdings Inc. The Motley Fool owns and recommends AcuityAds Holdings Inc. The Motley Fool has a disclosure policy.

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