Doom, despair, and agony are upon us. The Dow Jones Industrial Average fell by 666 points on Feb. 2. There must be something symbolic that the Dow just happened to fall by a number associated with evil. (Sure, the index technically fell by 665.75 points, but who wants to quibble over a quarter of a point?)
This decline was the worst one-day drop for the Dow since the financial crisis of 2008 -- and we all remember what happened then. So over the weekend, I decided to carefully review my investment portfolio to identify all of the stocks that I should sell if the market continues to fall. It's best to be prepared, right?
To create a list of stocks to sell if the market keeps falling, I thought it would be best to first come up with key criteria to make the decisions. Financial condition was the first criterion that came to mind. I decided that I'd sell the stock of any company in my portfolio that was in poor financial shape.
Then it occurred to me that it wouldn't be smart to hold on to the stock of any company that was in an industry that was likely to be rendered obsolete by new innovations. Dinosaurs simply don't have a place in a market with a survival-of-the-fittest dynamic. But those two criteria weren't enough. What if I had a stock of a company that was in pretty good financial shape and operated in an industry that was sustainable, but had a horrible management team? I decided any such stock had to go.
I racked my brain to identify any other factors that should be part of the criteria to dump a stock. One word popped into my head: valuation. It wouldn't make sense to hold on to a stock that was valued so ridiculously high that there was no way for it go higher. Applying the criteria I currently own 20 stocks. As it turned out, most of the businesses behind these stocks are in great financial shape. That only made sense, because most of them were in great financial shape when I bought the stocks. There is one exception, though. Editas Medicine (NASDAQ: EDIT) is a biotech with no approved products, and therefore no steady stream of revenue. But I knew that was the case when I bought Editas. The reason the lack of ongoing revenue didn't prevent me from buying the stock was that I believed in the long-term potential for the CRISPR-Cas9 gene-editing technology that Editas is pioneering.
At around 11:50 a.m. ET, the Dow was down 180 points, or 0.7%, the S&P 500 was down 15 points, or 0.5%, and the tech-heavy Nasdaq was down 25 points, or 0.3%. The Nasdaq had traded up as much as 0.2% during the morning after a big bounce off the close.
The Dow and the S&P 500 both lost over 2% on Friday to cap the market’s worst week since 2016. Futures started the morning deep in the red and the market opened near its lows of the day. Since then it has been a volatile trading session with stocks swinging from losses to gains over the last couple hours.
Shortly after the market open the Dow had been down as many as 300 points, or 1.1%.