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In his 2016 interview to CNBC, Buffett said that we should be happy about drawdowns.
“Anytime stocks go down, I like it. I am a net buyer of stock.
When Stocks Go Down, It's Good News”
While not all drawdowns are equal, here are 3 companies within our investable universe that are in a deep drawdown. As a disclaimer, there are potential bargains that warrant a closer look, not blind investment. Read till the end to vote on which company you want us to do a deep-dive on!
1. The Trade Desk
The Trade Desk operates one of the world’s largest independent programmatic advertising platform. It helps brands and agencies bid in real-time across TV, display, audio, mobile and retail-media inventory.
Drawdown
The company is down 51% from its previous ATH in Dec’24 and is down 42% for the year. The company have recovered some of its losses and is up 50% from its bottom in Apr’25. The main reasons for the drop were:
For the first time in eight years, The Trade Desk missed its revenue guidance for Q4’24 and crashed 40% in Feb’25. (Actual revenue of $741 million vs $760 expected)
The slow and buggy rollout of the company’s next-generation ad-tech platform, Kokai was attributed to the revenue shortfall.
The company is also facing a class action lawsuits as the they allegedly mislead its investors on the new platform rollout.
Rebound Catalysts?
Last month, the company reported a 25% YoY growth in revenue and margins expansion to 8%. The forward guidance projects continued growth for Q2’25.
Two-thirds of The Trade Desk’s clients are already transacting on Kokai, the company’s new AI-powered optimization layer.
Acquired Sincera, a digital advertising data company, at the end of the first quarter.
The balance sheet is very strong with $1.7 billion in cash & short-term investments with zero debt.
2. UnitedHealth
UnitedHealth Group is the largest health care company in the U.S.. It specializes in health insurance and health services, operating through its two main businesses: UnitedHealthcare (insurance) and Optum (health services and technology).
Drawdown
The company is down 48% from its peak in Nov’24 and is down 37% for the year.
UnitedHealth had its largest fall in 26 years in Apr’25 after the company had its first earnings miss since 2008.
The DOJ criminal probe into medicare billing and the leadership churn is affecting company stability.
Rising medical costs forced management to slash EPS guidance.
Rebound Catalysts?
Company fundamentals are still growing — Revenue went up 10% YoY and memberships increased by 780,000.
Strong balance sheet with $79 billion in cash with $5.5 billion in free-cash-flow per quarter.
Exiting Latin America to refocus on the U.S. business.
The company is now trading at a historically low P/E ratio of 13 making it a value play.
3. Nike
No need for introduction — Its the world’s largest athletic-footwear and apparel brand, selling in 170-plus countries.
Drawdown
The company has been in a deep drawdown ever since its pandemic high in 2021. Its now down 66% from its ATH. Every rebound turned out to be a dead cat bounce, and the stock has continued to slide due to a mix of macroeconomic factors and self-inflicted wounds.
The main issue was a strategic misstep where the company made a deliberate shift to direct-to-consumer sales during the lockdown. While it worked out well during the pandemic, it backfired as consumers returned to brick-and-mortar stores where Nike products were poorly stocked.
That meant that the company has experienced four consecutive quarters of sales decline, with Q3’25 falling 9% YoY.
Gross margins have also fallen as Nike has to give heavy discounts to move their inventory.
Finally, the company is also significantly affected by U.S. tariffs as it produces most of its products in China, Vietnam, and Indonesia.
Rebound Catalysts?
Nike is one of our weakest rebound prospects:
They appointed a new CEO in Oct’24 who is working on mending wholesale relationships, reducing costs, and improving product innovation. Investors are not convinced and the stock is still down 18% this year.
The company plans to cut $1 billion in annual costs by 2026 through tech outsourcing and leaner operations.
Despite these challenges, the company has a strong balance sheet, great cash flow, and a strong dividend record.
While the turnaround might work, even the new CEO has claimed that it will take longer than expected.
Before making your decision, be sure to evaluate each company based on our quality rubric.
Are the fundamental issues with the company cyclical or secular?
Is the unit economics profitable?
How significant is the capital investment risk?
How strong are the company’s financials?
Is the management clear about the challenges?
We would love to hear what you think. Reply to this email or