How seasoned investors handle growth stock meltdowns (plus 7 companies and ETFs they're buying now)

It’s been a bruising few weeks for growth investors - and Liberation Day has made it worse.

Whether you're backing high-flying names locally or globally, household favourites like NVIDIA, Alphabet, Pro Medicus, and Aristocrat Leisure have shed 10% to 30% in just a matter of weeks.

When a big chunk of gains disappears from your best-performing stocks, it’s only natural to break a sweat and start second-guessing your investment decisions.

So what should you actually do when your portfolio takes a hit like this? Do you buy the dip, cut your losses, or simply ride it out?

To find out, we spoke with three experienced investors about how they handle sharp drawdowns in quality growth names, and some of the opportunities they’re eyeing as red ink spills across trading screens:

• Adam Dawes, Senior Investment Adviser at Shaw & Partners
• Andrew Peros, Co-Portfolio Manager of the Ausbil MicroCap and SmallCap Funds
• Emanuel Datt, Founder of Datt Capital

Don’t panic: Stay grounded in fundamentals

"Emotional decisions rarely lead to good outcomes," says Dawes.

Dawes says the key to navigating a sharp correction is staying focused on fundamentals like company revenue trends, industry tailwinds and valuations relative to future growth.

"If the long-term story hasn't changed, the move may be noise."

Datt echoes this view. "Drawdowns in investing can be taxing, however, it's important to make impartial, rational decisions rather than letting emotion prevail," he says.

He adds that having conviction in your positions and preserving flexibility are crucial to letting volatility work to your advantage.

Peros says that sharp corrections are par for the course.

"Over the past two years, we have seen four corrections with a drawdown of more than 5%. Unless we see a material change in a company’s fundamentals, we typically lean into the volatility and embrace corrections as buying opportunities."

When to re-evaluate your thesis

A falling share price doesn’t necessarily mean your thesis is broken, but it should trigger increased scrutiny.

"A sharp drop can be a trigger to re-examine assumptions and stress-test our conviction, especially in high-multiple names," says Dawes. 

While fundamentals are the main driver of buy and sell decisions, he believes that governance issues (such as with WiseTech) can cloud the investment case.

Datt agrees, noting: "A stock price viewed in isolation is meaningless and may be more a reflection of market positioning rather than an assessment of fundamental value over the medium term."

For Peros, who focuses on the more volatile small and micro-cap end of the market, heightened scrutiny is just part of the job: "In small and micro caps, there’s always something to worry about - even in bull markets."

"While price movements and valuations matter, our primary focus remains on future earnings potential," he says.

"Our fundamental process doesn’t change based on market cycles; we assess each company on its merits. There are no sacred cows in the portfolio - if the underlying facts change, we act accordingly."

Average down or cut your losses?

One of the most difficult questions investors face during a correction is whether to top up a position or get out.

"Every stock in our portfolio must earn its place – we run a concentrated portfolio with no “stocking fillers,”" says Peros. 

"If the only change is price, we see it as a chance to buy the dip. However, we always assess opportunities relative to the broader portfolio."

Dawes aligns with that view, but cautions that it's not about blind buying.

"We reassess when there's a material change in fundamentals. Every investor should re-examine assumptions and stress-test the portfolio, especially in high-multiple names," he says.

Managing cash and defence

According to Dawes and Datt, holding cash or defensive assets is one way to soften the blow of sharp market corrections.

"We always aim to keep some dry powder – typically 5–10% – to take advantage of dislocations," says Dawes. 

"During corrections, we may trim extended or lower-conviction positions to raise cash. We also consider adding lower-beta names or ETFs with more stable earnings to buffer volatility."

Datt sees cash as a strategic asset and urges investors not to worry about so-called "cash drag" — the idea that uninvested capital necessarily drags on performance.

"On average, our funds have held a circa 10% cash weighting over their respective lifetimes. We strongly believe that cash should be treated as a strategic asset that augments portfolio performance," he says.

Interestingly, Peros takes a different approach: "We don’t tactically use cash to manage risk or volatility – we stay relatively fully invested, as there are always opportunities in the small-cap market." 

Instead, he prefers adjusting the portfolio by concentrating in high-conviction ideas or rotating into more defensive or liquid names.

The stocks they’re buying (and selling) right now

Of course, theory is one thing. But what are these managers actually doing with their portfolios?

Datt Capital recently took positions in Metals X (ASX: MLX) and Meeka Metals (ASX: MEK).

"We identified Metals X as a beneficiary of a potential positive externality in terms of growing civil unrest in the Democratic Republic of Congo, a major tin producing nation," Datt says.

"Consequently, the Bisie tin mine, one of the world’s great tin producers, has ceased production, causing tin prices to lift materially."

On Meeka, he adds: "We took a position based on our strong conviction outlook for gold prices just prior to the US election, and the paucity of new gold production assets in safe jurisdictions such as Australia. The company is on track to deliver first gold at materially higher assumed prices than its feasibility studies assumed."

Ausbil has been buying Aussie Broadband (ASX: ABB) and Codan (ASX: CDA).

"ABB is one of the leading challenger internet providers, which is enabling the shift to AI for its clients," says Peros. "We have increased its weighting in recent weeks." 

"An on-market buyback and likely upbeat investor day in early April have further underwritten our investment case for ABB".

On Codan, Peros increased his weighting following the February reporting season, after the stock sold off on concerns that a potential Russia–Ukraine peace deal could negatively impact demand. 

"While the risk was valid, our analysis suggested that the market reaction overstated the worst-case impact on CDA’s earnings profile.

"This disjoint in thinking in the market provided an attractive entry point into a high-conviction name that is delivering 10–15% in underlying organic growth, with what we believe to be further upside potential from accretive M&A opportunities.

Meanwhile, Dawes has used the market correction to adjust his portfolio with a view to both value and growth. One key move has been trimming exposure to the Betashares Nasdaq 100 ETF (ASX: NDQ) in favour of European equities and Global X Physical Gold (ASX: GOLD). 

"During this recent correction, we saw dislocations not just in high PE stocks, but also in quality compounders that have been caught in the crossfire," he says."

"We also took advantage of weakness in Pro Medicus (ASX: PME)– longer term, the global imaging opportunity remains intact."

It's ugly out there, but keep a level head

Corrections are ugly and they can test the best of us. There's no sugarcoating that. But as these experts show, the difference between long-term success and costly mistakes often comes down to process, discipline, and staying focused on the fundamentals.

Whether you're a professional or a retail investor, the same lessons apply: Stay calm. Know your thesis. And keep some dry powder.