Has a Market Meltdown Begun?

A reminder that February’s buys for the Asymmetric Portfolio will go out to premium subscribers in the morning. I’ll also be hosting an AMA on Tuesday morning at 9:00 a.m. Central Time.

The S&P 500 and Nasdaq 100 are within shouting distance of their all-time highs, but it doesn’t feel that way for most investors. The market’s gains have been concentrated in some huge moves in semiconductor and mining-related stocks.

On the other side of the market is the decline in stocks like Salesforce $CRM ( ▼ 0.65% ), Shopify $SHOP ( ▼ 4.42% ), Spotify $SPOT ( ▼ 4.71% ), and Robinhood $HOOD ( ▼ 7.76% ) that seem like rock-solid growth companies.

I think there are discounts forming in certain areas of the market, although the ride will likely be bumpy. More on that in a moment.

You can see the relatively steady performance of the indexes, but there’s a lot of turbulence underneath.

The Asymmetric Portfolio has taken it on the chin as some of these growth and software stocks have fallen off.

And despite solid earnings so far, the selloff continues. But I’m a long-term investor and volatility is the price of admission for long-term gains.

We’ve all heard the phrase “buy low, sell high.”

Or Buffett’s famous line, “be fearful when others are greedy and greedy when others are fearful.”

It’s easy to say things like that, but it’s harder to put them into action.

It’s hard to buy a stock that seems to go nowhere but down.

But the profit is in finding gems the market is overlooking and holding them long enough to realize asymmetric returns. This is what Spotify has done since it was the first stock I covered on Asymmetric Investing.

So, where are we today?

I’ve been writing for months that the market is in a precarious position, and AI investment drives a disproportionate amount of growth, and the bottom 90% of consumers struggle.

But the recent declines in some corners of the market are the baby being thrown out with the bathwater in a number of areas. Great businesses have seen their stocks crushed over fears that may never materialize.

It’s a strange juxtaposition, but I feel greedy and fearful at the same time.

For example, SoFi $SOFI ( ▼ 5.7% ) reported a phenomenal quarter with a “beat and raise,” on Friday but shares fell 6.5% and are now 29% off their high.

Duolingo $DUOL ( ▲ 0.1% ) is now trading for less than its IPO price and is valued at just 17x free cash flow because…disruption? This is a company growing revenue at a 40% clip over the past year!

I could go through example after example of the market selling great companies on fears that may not materialize. But that’s where the opportunity lies.

That said, I also think the AI bubble will burst and there may be a recession in 2026. So, discounts may last for a while.

As I see it, all we can do is buy great companies at reasonable (and sometimes silly) prices and let the market correct itself over time.

In all honesty, I’m more comfortable when the market is down than when it’s up. And I’m seeing some great opportunities.

I won’t bat 1.000, but I’m taking enough swings in the current dislocation to have a high probability of some big returns.

But this decline could also last a while. The economy isn’t on great footing, and big companies are announcing layoffs left and right. If a “risk off” environment ensues, the market won’t have a good year.

That will mean a great opportunity to buy amazing companies on the cheap. As long as fundamentals are getting better, a lower stock price isn’t a reason to worry.