Don't Quit a Winning Strategy After a Down Month

Editor's note: 2025 hasn't been an easy year for investors. But according to Matt Weinschenk – director of research at Stansberry Research – that doesn't mean it'll always be that way. In this article, excerpted from the June issue of The Quant Portfolio, Matt explains why even the best of strategies may not work in all markets... but buying quality stocks will outperform in the end.

Let's say you're a Major League Baseball pitcher looking to improve your game...

And you've set your sights on developing a wicked sinker.

A good sinker pitch comes in fast and – most importantly – low. To the batter, it looks like you're throwing a fastball. But if you throw it correctly, a sinker will drop about 6 to 9 inches lower than a fastball by the time it reaches the plate.

That sudden drop often surprises the batter. So they'll swing too high and either miss entirely or hit a weak ground ball that fielders can catch with their eyes closed.

Let's say that by opening day, you have the pitch dialed in.

Yet, when the very first batter steps up to the plate and you throw your sinker... he rips the ball to center right and makes it all the way to second base.

You stand there for a minute, baffled.

Your pitch was perfect. How had it not caught him off guard?

Well, because the batter was a lefty... and you threw right-handed.

There was nothing wrong with your pitch. It works well against right-handed batters (which the majority of MLB players are). It just doesn't work against left-handed batters.

That doesn't mean you should ditch your new pitch. It just means you need to study your opponents closely to determine when a sinker will work... and when it won't.

This is a vital lesson for investing, as well...

Like with baseball, no single investing strategy works in every market.

But if you have a deep understanding of why your particular strategy works and when, you'll be better able to ride out short-term periods of underperformance.

You won't panic if your portfolio has a down month – because you know your strategy will perform well at other times.

How to Think Like One of the Greatest Value Investors

Take the dot-com bubble of the late 1990s, for instance.

Back then, investors were pouring into high-growth tech stocks and dumping value stocks. Legendary investor Warren Buffett's holding company Berkshire Hathaway (BRK-B) – known for its value-investing strategy – underperformed dramatically against the tech-heavy Nasdaq Composite Index... for a while.

Take a look...

Did Buffett abandon his value-investor principles? No.

He watched the Internet bubble form, and he knew that his strategy wouldn't necessarily hold up in that kind of high-growth environment.

Buffett is the quintessential fundamental investor. Value is what he knows best.

Value stocks are known for trading at a discount. They pay solid dividends, but they're relatively stable with low volatility... the complete opposite of the Internet growth stocks that were taking off at the time.

The Internet bubble, to a value investor, was like a lefty batter stepping up to the plate.

But Buffett didn't panic. He knew that his strategy would pay off over the long term – and it did.

So while it may sound strange, the truth is that to invest successfully over the long term, you've got to think like Buffett... Stick with what you know works.

Why Quality Stocks Lead to Better Long-Term Returns

A portfolio focused on high-quality stocks is designed to create long-term, market-beating returns and to protect against volatility.

As you can see in data from quant firm AQR Capital Management – going all the way back to 1957 – buying high-quality stocks clearly trumps buying low-quality ones...

This is true over the long term. But it doesn't always hold on the time scale of a single month...

For one, high-quality stocks tend to sport higher valuations. Most of the time, in markets, you get what you pay for. The upside potential may not be huge.

Second, there are times when quality just doesn't matter.

If you invested during the bull market of 2020, you know this well. The market was dominated by junky cryptos, meme stocks, and questionable special purpose acquisition companies ("SPACs").

People were bored at home and flush with stimulus payouts. They just wanted to buy something. Quality didn't matter.

That's also what has happened with the recent market rally – albeit not to the same extreme...

But our strategy is to buy quality for the long term, even if rallies like the recent one leave us a few points behind.

Like in 2020, quality hasn't really mattered to investors today. A few months ago, everyone was worried about tariffs, and the broader market sold off. But as the tariff fears have eased and the market has come back to life, investors have been buying everything...

Whether you look at the performance from the market's April low or just the month of May, quality stocks lagged the market.

But don't stop throwing your sinker just because you've faced a lefty batter.

Over the long run, buying quality stocks leads to lower volatility and better returns – and we have plenty of evidence that this strategy works.

That gives us confidence to stay invested.

Going forward, quality should stand a better chance against the other factors currently driving this market.

And even if it takes a few more months to see this in the market, we know that quality will win out over time... and it can do so in a big way.

Good investing,

Matt Weinschenk

Editor's note: April's crash wiped $10 trillion off the stock market in days... Meanwhile, Stansberry's most important recommendation ever outperformed the market 3-to-1. This strategy helped protect our subscribers' hard-earned money – with no guesswork, crazy risks, or complicated trading involved. And if you make one choice by July 17, you could potentially double your entire portfolio.