But don’t get me wrong. Buying now is not a prudent short-term bet. And Mr. Romick emphasized that it would be foolish to buy in this market with the expectation of making a quick profit. To the contrary, he said, he has no idea where the stock market is heading over, say, the next three months, except: “I expect that there will be a lot more pain, unfortunately.”
With that in mind, Mr. Romick suggested a thought exercise. Imagine that the stock market, with all its lurches and false signals, won’t even exist for those three months. “The question then is: When the market comes back three months from now, what should I have in my portfolio that I’ll want there for the next five to seven years?” he said “We’re making investments with that kind of horizon in mind.”
With its long view, the FPA Crescent fund has become more bullish now that we’re in a bear market, the fund’s data suggests. Its net allocation to stock on Feb. 19 — the peak for the S&P 500 — was 57 percent. By March 13, it had risen to 67 percent. In that same stretch, the S&P 500 declined 20 percent, according to FactSet. In other words, the overall market represented by that index became 20 percent cheaper. (The bad news, or the good, depending on whether you are buying or selling, is that it has become cheaper still.)
Unlike index fund investors — and I am one — Mr. Romick isn’t putting money into the entire stock market. Instead, he buys individual stocks. Citing regulatory constraints, he would not disclose his most recent purchases. But he cited Alphabet, the parent of Google, and the American International Group as longtime portfolio holdings that are even more appealing now that they’re being pounded.
Google relies on advertising for the bulk of its revenue, worrying some investors in this environment, and A.I.G., a global insurance group that was bailed out in the last financial crisis, will face insurance losses connected to the coronavirus, Mr. Romick said. He is confident that both stocks will continue to be profitable for his fund, however, even if their prices fall further in the next few months.
Still, he’s not recommending that ordinary people jump into stocks in a big way right now.
Others are even more emphatic. For example, Richard Bernstein, a former Merrill Lynch strategist who now runs his own firm, said he thought investors were still barely coming to grips with the reality of a bear market. That’s not surprising, he said, because a falling market typically has three important phases.
In the first phase, he said, people tend to say things like: “The worst is over. There are bargains out there. I’ve got to jump in.” The second is: “No, this is worse than anybody ever imagined.” Right now, he said, people are probably teetering between these two attitudes.