David Bahnsen, American portfolio manager and founder of The Bahnsen Group, cautioned investors against blindly buying dips in overvalued technology stocks (XLK), despite the 5% market pullback observed in November.
“I think that the names that have dipped the most are grotesquely over-valued, and they could easily catch a bid and rally, but it’s entirely speculative,” said Bahnsen.
He specifically highlighted Nvidia (NVDA), noting the stock experienced a nearly 20% drawdown mid-month “on really, really good news, not bad news,” suggesting the decline was driven by the stock’s expensive valuation rather than disappointing performance.
In addition, portfolio managers are facing unprecedented challenges as 2025 comes to a close, according to Michael Farr, CEO and founder of investment advisory firm Farr, Miller, and Washington.
He described the current environment as “hard to manage at this year-end as any time you can remember.”
The difficulties stem from concentrated positions that have significantly increased in value over the year, forcing managers to balance risk management with tax consequences while identifying genuine value in the market, he said.
For investors seeking opportunities, Bahnsen recommended rotating into “better value sides of the market,” noting that while Bitcoin (BTC-USD) and AI-related stocks (ARTY), (AIQ), (AIEQ) struggled in November, healthcare (XLK) rose by double digits and consumer staples (XLP) gained approximately 800 basis points relative to the S&P 500 (SP500).
“Not to get out of risk, but whether it’s dividend growth, value-type things that we like, or growth at a reasonable price, that’s all different than buying things at 60x earnings you hope go to 80x earnings,” Bahnsen said.
Farr, however, warned against being “overly cautious,” particularly regarding stocks like Nvidia (NVDA) that continue to deliver strong performance.
“They’ve got a half trillion dollars in orders on chips for 2025 and 2026 combined. They are delivering numbers,” Farr noted, while acknowledging the valuation concerns.
He also identified potential opportunities in healthcare (XLV), energy (XLE), and consumer durables heading into 2026.
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