Meet the Only Stock I've Purchased During the Nasdaq Correction

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Sean Williams, The Motley Fool

Tue, Mar 25, 2025, 1:51 AM 7 min read

Over the past 5 weeks, investors person been fixed a needed but perchance unpleasant reminder that stocks don't determination higher successful a consecutive line. Between Feb. 19 and March 21, the wide followed Dow Jones Industrial Average, broad-based S&P 500 (SNPINDEX: ^GSPC), and maturation stock-powered Nasdaq Composite (NASDAQINDEX: ^IXIC) respectively shed 5.9%, 7.8%, and 11.3% of their value.

You'll enactment the double-digit percent diminution for the Nasdaq Composite firmly placed this market-leading scale successful correction territory.

While banal marketplace corrections are traditionally a large clip to bash immoderate bargain hunting, a historically pricey marketplace has made maine deliberation doubly astir pulling the trigger. During this five-week downturn, there's lone 1 banal I've purchased -- and it's rapidly go 1 of my halfway holdings.

A idiosyncratic penning and circling the connection bargain beneath a dip successful a banal chart.

Before digging into the details of the 1 and lone banal I've bought with frequence successful caller weeks, fto maine explicate my reasons for walking connected eggshells during the existent Nasdaq sell-off.

The prevailing interest I person for Wall Street has small to bash with President Donald Trump's tariffs, the prevailing complaint of inflation, oregon what the Federal Reserve mightiness bash adjacent with involvement rates. Rather, it's the historical priciness of equities.

To authorities the obvious, "value" is simply a subjective term. What I presumption arsenic exceptionally pricey mightiness beryllium deemed a bargain by different investor. Despite having immoderate grade of play erstwhile it comes to the subjectivity of what constitutes value, statistic undeniably accidental that stocks are pricey.

My go-to valuation instrumentality that helps maine measure the comparative cheapness oregon priciness of the broader marketplace is the S&P 500's Shiller price-to-earnings (P/E) Ratio. You'll besides find the Shiller P/E referred to arsenic the cyclically adjusted P/E Ratio (CAPE Ratio).

The Shiller P/E is based connected average, inflation-adjusted net from the erstwhile 10 years. Adjusting for ostentation and looking astatine a decade's worthy of net past provides the closest happening to an apples-to-apples valuation comparison.

As of the closing doorbell connected March 21, the S&P 500's Shiller P/E Ratio clocked successful astatine 35.28. For context, this is much than treble its mean speechmaking of 17.22, erstwhile back-tested to January 1871. Additionally, the highest speechmaking of 38.89 successful December marked the third-highest speechmaking during a continuous bull marketplace cycle, dating backmost 154 years.

On apical of the Shiller P/E telling maine that banal valuations are extended to the upside, historical precedent provides a warning. The erstwhile 5 times (excluding the existent instance) the S&P 500's Shiller P/E topped 30 were yet followed by declines successful the benchmark scale of astatine slightest 20%.