It was another painful day for Wall and Bay Street on Monday, with tech stocks — once again—leading the charge lower. With the S&P 500 flirting with a bear market, questions linger as to how severe a coming recession will be. Though a recession is not guaranteed, it certainly feels as though it’s inevitable at this juncture, despite solid employment.
Undoubtedly, the stage seems set for some sort of stagflationary environment. While there’s no telling when the market correction (can we call it a crash now, with the Nasdaq 100 down over 25%?) will bottom, it’s safe to say that panic is in the hearts of investors. Still, Canadian investors need not panic, as this is just the second vicious plunge we’ve experienced in a three-year timespan. Corrections and crashes happen. And when it’s times like these, when it feels foolish (lower-case f) to be a buyer of anything when the risk/reward tends to be on the side of investors.
Tech and high-multiple growth will continue to take the brunt of this selloff. When the tides turn, however, it will likely be tech that leads markets higher. Indeed, the negative momentum is accelerating, and it’s a scary time. But if you’ve got ample cash on the sidelines, it’s time to — like Warren Buffett — cast a line in the water, as there’s a lot of money to be made over the long run in times like these. As someone wise once put it, “most money is made during bear markets.”
Though we’re not officially in a bear market yet, it’ll take one or two more days like Monday to send us into one. But you need not panic if you’ve got a game plan. I’m sure you’ve heard that value is the way to go to defend against inflation and volatility. Nobody wants to be in the hardest-hit corner of the market. If you’re a young investor with time on your side, I’d argue that the tech rubble is worth looking into if you’ve got an investment horizon beyond three years.
In this piece, we’ll check out one tech stock that may be worth nibbling into on the way down.
Kinaxis: A supply-chain management software producer that’s down and out
Kinaxis (TSX:KXS) is a software-as-a-service (SaaS) player that helps firms iron out the wrinkles in the supply chain. Undoubtedly, the past two years have seen no shortage of supply chain problems. The COVID crisis and China’s zero-COVID policy have proven detrimental to the supply chain. Through tough times, scenario simulations have been in high demand. And although Kinaxis helps with supply chain management, sometimes constraints are beyond solving, given the weakening macro.
After falling over 4.5% on Monday, Kinaxis may be worth buying on the way down. The stock is down 42%, and losses seem to be accelerating. Nevertheless, the Canadian tech stock is starting to get oversold, and when markets finally do bottom, KXS stock could be one of the leaders in the next run.
The Foolish bottom line
Nobody knows when the tech-led selling will end. Regardless, young investors should at least think about averaging into some of the tech stocks that they liked when they were multitudes higher. Indeed, not much has changed about the businesses themselves in the last three weeks. Yet shares have continued to crumble in one of the worst starts to a year for markets in ages.
