Buffett said you have to be prepared for a stock to drop 50% or more. Will these current losers be long-term winners?

Benzinga and Yahoo Finance LLC may earn commission or revenue for some articles through the links below.

With a net worth of over $140 billion, Warren Buffett is one of the most popular investment gurus as his simple yet effective investment strategies are followed by millions around the world. He has long advocated the “buy and hold strategy.”

In fact, he has held certain stocks in his portfolio, namely The Coca-Cola Company (NYSE:KO) and American Express Company (NYSE:AXP), for over two decades, having made his initial investment in the 1990s.

More trends:

• This multi-billion dollar fund invested in the next big real estate boom, here’s how you can sign up for $10.
  This is a paid advertisement. Please carefully consider the Fundrise Flagship Fund’s investment objectives, risks, fees and expenses before investing. This and other information can be found in fund prospectus. Read them carefully before investing.

• Your biggest profit may not come from the stock market. Invest like colleges, pension funds and the 1% do. Start investing in commercial real estate today.

While markets cheered the Federal Reserve’s decision to cut rates by 50 basis points, broader macroeconomic concerns are expected to linger soon.

In a shock twist, the benchmark S&P 500 fell 0.29 percent on the day after the central bank’s announcement, while the technology-focused Nasdaq Composite fell 0.31 percent.

“It’s important to note that stocks are not moving forward (at least not yet) after getting what they wanted,” said Steve Sosnick, chief market strategist at Interactive Brokers.

Buffett’s sage advice

Warren Buffett has always tolerated holding stocks for the long term, especially in turbulent market conditions. The current market swings are a stark reminder of the uncertainty in the investment world.

“It’s amazing to me how even when the markets get what they apparently want, they immediately want more,” Sosnick commented, after markets tumbled on the Fed’s rate cut announcement.

One of Buffett’s most iconic lessons is to be prepared for a stock to drop 50% or more regardless of market conditions.

“You should not buy stocks unless you expect to hold them for a very long time and you are financially and psychologically prepared to hold them,” Buffett said during Berkshire Hathaway’s 2020 annual meeting. “You have to be prepared when you buy a stock for it to go down 50% or more and be comfortable with it as long as you’re comfortable with holding it.”

The story continues

NIKE

As one of the most recognizable brands in the world, the decline of Nike, Inc. (NYSE:NKE) over the past year has raised eyebrows. Shares of NKE have fallen more than 25 percent this year as a slowdown in consumer spending has hit the apparel industry hard. The company expects its sales for the latest quarter to fall 10% due to slowing demand in China, mixed consumer trends and increased macroeconomic uncertainty.

However, Nike management is optimistic about its prospects.

“A return to this scale takes time,” Nike CFO Matthew Friend said during an earnings call. “While the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable and long-term growth.”

Additionally, NKE shares are up more than 3.5% in the past five days following the rate cut. As consumer spending recovers, Nike sales are expected to increase.

See also:

United Parcel Service

United Parcel Service, Inc. (NYSE:UPS), a global leader in logistics and package delivery, has faced some tough times recently. The company’s recent increase in labor costs after signing a new labor contract with significant wage increases directly affected operating margins. That, along with lower volume momentum, has sent UPS stock down more than 15% year-to-date.

“The product mix is ​​expected to continue to put pressure on unit revenue, however, by managing expenses and slowing labor inflation, we expect to grow third quarter operating profit by double digits and exit the year with a operating margin in the US of 10%,” said Brian. Dykes, CFO of United Parcel Service.

Despite difficult market conditions, United Parcel Service has taken active steps to restructure its business. The company is in the process of selling Coyote Logistics, its trucking business segment, which is poised to free up about $500 million in cash reserves.

In addition, UPS expects to complete the acquisition of Estafeta, a Mexican express delivery company, by the end of this year.

Interest rates are falling, but those yields aren’t going anywhere

Lower interest rates mean some investments won’t yield similar results to past months, but you don’t have to lose those gains. Certain private market real estate investments offer retail investors the opportunity to capitalize on these high-yield opportunities, and Benzinga has identified some of the most attractive options for you to consider.

Arrived Homes, the investment platform backed by Jeff Bezos, offers a Private credit fund. This fund provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual return paid to investors monthly. The best part? Unlike other private credit funds, it has a minimum investment of only $100.

Don’t miss this opportunity to take advantage of high yield investments while rates are high. Check out Benzinga’s favorite high yield deals.

This item, Buffett said, you need to be prepared for a stock to drop 50% or more. Will these current losers be long-term winners? originally appeared on Benzinga.com