The Nasdaq pulled back while the Dow showed resilience, with consumer staples emerging as a safe hav

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Tech stocks plunge while Coca-Cola hits a new high: How can we regain investment confidence amid market turbulence?

The recent market may have felt painful for many investors.Overnight, AI-related hot stocks—led by sectors such as data storage and optical communications—continued their sharp decline. Watching the numbers in your account shrink naturally brings feelings of anxiety and disappointment.

However, as this AI-driven rally recedes, broader economic sectors have seen widespread gains. Among them, $Apple (AAPL.US)$ The Travelers Companies $Coca-Cola (KO.US)$ and consumer giant Coca-Cola both surged to record highs.

Take Coca-Cola as an example—its impressive results provided a strong boost of confidence to the market:

– Steady revenue: Coca-Cola reported second-quarter comparable revenue growth of approximately 6% year-over-year, reaching $13.37 billion.

– Strong profitability: Earnings per share rose 16% to $1.03, while adjusted earnings per share increased 11% to $0.97.

– Optimistic outlook: Full-year adjusted EPS growth guidance has been raised from 8%–9% to 9%–10%, with full-year free cash flow expected to be approximately $12.4 billion.

This market rally is, in fact, gently reminding us:When the market feels uncertain and skeptical about the distant future, companies that can consistently generate profits and robust cash flows right now will once again become our safe havens.

The power to weather volatility: It’s not just about AI

As of July 28, among the top ten gainers in the Dow Jones Industrial Average are both $Cisco (CSCO.US)$ and $Apple (AAPL.US)$ and $Caterpillar (CAT.US)$ 、 $The Travelers Companies (TRV.US)$ 、 $UnitedHealth (UNH.US)$ 、 $Johnson & Johnson (JNJ.US)$ 、 $Coca-Cola (KO.US)$ 、 $Merck & Co (MRK.US)$ 、 $Chevron (CVX.US)$ and $Amgen (AMGN.US)$ 。

Among them, Cisco is up 52.23% year-to-date, Caterpillar has risen 47.68%, and The Travelers Companies has gained 38.02%. Consumer, healthcare, and energy companies such as Coca-Cola, Johnson & Johnson, Merck & Co, and Chevron have also posted year-to-date gains generally exceeding 25%.

This shows that, this year, it’s not only AI-related stocks that have truly weathered market volatility.

When tech stock valuations keep expanding, investors focus on growth potential; but when markets enter a pullback phase, investors refocus on how much money a company is earning right now, whether its cash flow is stable, if its balance sheet is sound, and whether its current valuation is reasonable.This is precisely why value stocks are regaining investor attention.

Amid the current market conditions, these three points deserve attention

First: Accept losses and ensure you stay in the game

After a sharp market decline, the most common mistake many investors make is increasing leverage as losses mount, hoping to quickly recover their money with a single rebound.

When facing significant drawdowns, our instinctive reaction is often to urgently add leverage to 'win back' losses, hoping a single rally will restore everything we’ve lost. Understand that this is only human nature—but it’s also the moment when your account is most vulnerable to crisis.

Losses exhibit a cruel mathematical asymmetry: a 20% drop requires a 25% gain to break even; a 30% drop requires roughly a 43% gain; and if you lose 50%, you need a 100% gain (i.e., doubling your money) just to return to breakeven.

Leverage will mercilessly amplify this pressure. If your position moves against you, you may face not only margin calls but even the unfortunate outcome of forced liquidation. Therefore, during this period of high volatility,our priority should not be trying to magically pinpoint 'the bottom,' but rather proactively reducing pressure on ourselves:

– Stop adding new leverage and prioritize unwinding high-risk margin positions.

– Reduce excessive concentration in a single AI stock or a single industry chain.

– Keep some cash on hand to retain optionality, rather than being forced into a defensive position with every market dip.

– Distinguish between a 'mispriced stock' and 'deteriorating company fundamentals,' and give yourself room to admit mistakes—don’t keep averaging down indefinitely.

💡Remember: preserving capital isn’t about proving how right your initial judgment was—it’s about ensuring you still have the ticket to enter when the next real opportunity arises.

Second: don’t rush to 'bottom-fish'; give time for the company’s actual profit-generating ability to be validated.

A once high-flying stock that has dropped 30% from its peak may indeed look cheap and tempting. But if its future earnings expectations have also fallen by 30%, its valuation hasn’t actually become cheaper.

If the stock price decline is due to canceled orders, customers cutting spending, or the need for continuous fundraising, then it reflects damaged fundamentals—not just market sentiment. For the AI sector, the market is no longer questioning whether 'AI demand exists,' but ratherwhether companies can truly convert that demand into real revenue and cash in their accounts.

If you’re looking for a bottom-fishing opportunity, consider waiting patiently until the following signals appear simultaneously:

– The company’s core orders remain solid, and industry demand is genuinely still growing.

– The balance sheet is healthy, with no need to rely on constant borrowing or equity issuance to stay afloat.

– The company generates enough cash (from operating cash flow or profits) to cover the costs of future expansion.

– Valuations have already fallen to a 'margin of safety' that offers peace of mind.

💡Operational recommendation: Bottom-fishing can be approached in three steps. First, use a small amount of capital to 'observe'—don’t blindly bet on catching the absolute bottom. Second, gradually increase your position once earnings guidance and order trends stabilize. Third, only after fundamentals are thoroughly validated should you include the stock in your core holdings. It’s better to pay a slightly higher price than to take on uncontrolled risk just to capture a bit more profit from the bottom.

Third point: Embrace the stability of value stocks, but maintain disciplined valuation discipline.

Watching Coca-Cola hit new highs might trigger an impulse: immediately sell all tech stocks and go all-in on defensive equities. But investing requires calmness—value investing must also adhere to 'valuation discipline.'

When a stock trades at historical highs, the market has often already paid a steep premium for its 'certainty.' Even if the company faces no major issues, any slight slowdown in future growth can cause its inflated valuation to retreat. Truly trustworthy value companies should possess these traits: pricing power, strong cash flows, manageable debt levels, and the ability to pay dividends or repurchase shares,and their current valuations should align with their future growth prospects.

Giants like Coca-Cola, Johnson & Johnson, and Caterpillar don’t share the trait of being 'absolutely risk-free,' but rather have clear, visible business models that don’t require us to gamble on a distant, uncertain future.

Summary: It’s not about abandoning AI, but about building a portfolio resilient enough to weather volatility.

The long-term structural trend of AI won’t necessarily end after one market pullback. However, we must face reality: in today’s high-valuation environment, it’s not enough for a company to simply operate in a growing industry—it must demonstrate that profits are keeping pace with its share price.

Looking ahead, we don’t need to make a painful binary choice between 'AI' and 'value stocks.' As investors, we can instead aim to build a more resilient, three-layer defense network:

Top-layer offense: Use AI leaders with extremely high earnings certainty to retain exposure to long-term growth opportunities.

Mid-layer defense: Allocate to high-quality value assets in consumer staples, healthcare, industrials, energy, and other sectors to reduce portfolio volatility.

Bottom-layer safety: Maintain ample cash reserves to confidently handle unexpected events and seize future buying opportunities.

When markets are smooth sailing, we often assume that 'offense' determines how much money we make; but after weathering storms, we realize that what truly drives long-term compounding wealth is first and foremostwhether we can survive steadily and securely。

First, take care of your emotions, protect your precious capital, and patiently wait for the day when valuations realign with earnings.When the next market upswing arrives, you—with cash on hand, no forced liquidations, and a clear mind—will undoubtedly be the true winner.

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