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Pro investors say sell-off is normal and offers a buying opportunity: ‘Buffett’s not panicking’

Despite stock markets getting crushed Wednesday, strategists say not only are sell-offs like this normal, they create opportunities for savvy investors.

“Warren Buffett’s not panicking,” Michael Farr, president and CEO of Washington, DC-based wealth management firm Farr, Miller & Washington told CNBC. “It’s a bucket of cold water but take a deep breath and know these things happen — let it work itself out.”

Farr highlighted that markets go through periods of volatility and downturns, an easy thing for investors to lose sight of after a historic nine-year bull market.

“You need to be greedy when others are fearful,” Farr said. “We did make lower lows here but have your list.”

Art Hogan, chief market strategist at B. Riley FBR, also advised to “start making a list.” He said Wednesday’s market drop could be weighing down companies that otherwise have strong earnings and fundamentals.

“If companies are doing fine and giving good guidance and good earnings, and they’re just going down because the markets are going down, that’s the time you want to sharpen your pencil and look for things you’ve missed in the past,” Hogan said. “They’re presenting great opportunities right now.”

Karen Finerman, CEO of Metropolitan Capital Advisors, echoed that playbook and said to “buy when there’s blood in the streets, even if it’s your own blood.”

The Dow Jones Industrial Average dropped more than 600 points Wednesday and erased all of its gains for 2018. The S&P 500 dropped 3.1 percent and also turned negative for the year, while Nasdaq Composite fell 4.4 percent as Facebook, Amazon, Netflix and Alphabet all traded lower. A sharp drop in tech shares and worries about corporate earnings added fuel to this month’s steep pullback.

Brian Belski, BMO Capital Markets chief investment strategist, highlighted some companies beating earnings for the third quarter — Oracle, Boeing, Visa, Microsoft, and United Healthcare and McDonald’s.

“This notion that earnings don’t matter, I’d like to debunk that because companies are beating earnings at an 80 percent clip,” Belski said.

Tech wreck

Tech stocks, which have led the U.S. stock market’s 2018 gains, were among the biggest losers Wednesday. The tech-heavy Nasdaq entered correction territory and saw its worst day in seven years. High-growth “FANG” stocks — the acronym for Facebook, Amazon, Netflix and Google (now called Alphabet) — led the Nasdaq lower. Alphabet, which reports earnings Thursday, was down 5 percent but Finerman highlighted that not much had changed for the company on a fundamental level.

“That’s panic. There’s nothing different about Alphabet’s business that makes it 5 percent less valuable,” Finerman said. “I want to own it.”

Rising interest rates have caused market jitters throughout October. But Finerman pushed back on that as a reason for the sell-off, and instead highlighted the U.S.- China trade war.

“We’re hearing these companies disappointing on earnings, they’re not saying the Fed is making it difficult for us, they’re saying there are tariffs issues.”

Investors are closely watching Amazon and Alphabet, which both report quarterly earnings after the closing bell Thursday.

Loup Ventures founder Gene Munster said despite the tech slide this week, he’s optimistic about Alphabet’s position in “transformative markets” like healthcare.

“There’s some headwinds with what’s going on with privacy and users and Google giving more transparency but I still think this is a great story to own,” Munster said.

Facebook has the shortest leash, he said because the company “isn’t transformative” and privacy issues could slow user growth. Amazon meanwhile has “no valuation support,” Munster said.

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