Should Investors Buy More of Their Most Beaten-Down Stocks Now?

While the S&P 500 and other headline stock market indexes aren't too far off from their all-time highs, there has clearly been pressure on many high-growth stocks and investors are feeling the pain. While it's certainly not desirable to sell promising businesses while they're beaten down, should investors simply hold on to their positions or get aggressive and double down? In this Fool Live video clip, recorded on Jan. 10, Fool.com contributors Matt Frankel, Jason Hall, and Danny Vena discuss how they're approaching the current situation with their highest-conviction but beaten-down stock positions. 

Matt Frankel: I like this one. Long Time Listener, First-Time Caller says, "Does the ranking equate to buy or buying more now for you guys?" I'll answer this and then you guys can chime in. Example, Lemonade (LMND 0.63%) is down 80% for the last year." For me, it's been equating to buying more. Out of the six stocks we're discussing today, I own five of them. [Note: This clip is from a show where three contributors ranked six of their highest-conviction investments for 2022.]

Out of those five, I've bought more of three of them in the past two months. I bought more MercadoLibre (MELI -1.55%), I bought more Lemonade, and I bought more Pinterest (PINS -0.09%) in the past month or so. For me, this is buying more. Would I have liked Lemonade to stay at around $190 a share today? Sure, that would've been fantastic. This is the long-term investing case. I didn't invest in Lemonade because I thought it would be a great stock to own for a year. I invested in it because I believed in the business long term. Same with MercadoLibre, which Danny's a longtime investor, I think he should probably tell you the same mindset. For me, it's been buy more. What about you, guys?

Jason Hall: Yeah. I'm pretty sure I own all of these, and I know I have added to Lemonade. I think Boston Omaha (BOC -0.74%) recently, I want to buy more Boston Omaha. Obviously, that's not happening for a few days now. Pinterest, I think of this Pinterest maybe the closest thing to a true value stock. I really do if you look at the price down below $33 a share. I think it's the risk-reward balance. To me, I think about my conviction with these stocks, think about my conviction with other stocks that maybe I don't own or how much do I own. Sometimes I think you have to be careful and make sure you don't overexposure yourself to your highest conviction stocks and just take on too much direct risk of that one stock. For me, I think that's the one big thing I tried to be mindful of when I add money to existing holdings. Danny?

Danny Vena: One of the things that I wanted to point out and for anybody who's listening to us, if you have looked at your portfolio today, if you've looked at your portfolio really any time since, I would say the beginning of November and if you are like me, my portfolio is getting hammered. One of the things that I see is any stocks that have been highly valued, any stocks that had any kind of a frothy evaluation, tech stocks, small-cap stocks, volatile stocks are all taking a beating right now. I think that is the prime time for me when I really get serious about adding to my portfolio, I try to add all the time, I'm buying stocks. Every month when I get paid, I'm adding to my portfolio.

But when I see large segments of the market just getting hammered, I see a large swath of opportunities. While it's painful to watch, I think I only had like three stocks in the green today at one point when I look. That's painful to see, but also, if I can focus on the opportunities and the stocks that I really know, nothing has changed in the investing thesis, at least not in the short term, or I'm sorry, at least not in the long term. The only thing that's changed in the short term is the price, that is prime time for me to be buying. Yeah, I'm definitely adding to my highest conviction stocks at this point, regardless of the fact that some of them are down 30%, 40%, 50%, 60%.