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Traders: here's what to buy during the sell-off

Key Points
  • On Thursday the Dow fell more than 1,000 points as the benchmark 10-year U.S. note yield rose to 2.88%.
  • Value investors Jim Lebenthal and Sarat Sethi are taking advantage of the dip to buy stocks at lower prices.
  • Lebenthal is watching Electronic Arts, Royal Dutch Shell, and Greenbrier.
  • Sethi is buying Alphabet, Oracle, Delta, Bristol-Myers, and others.

The stock market's wild ride continued on Thursday. The S&P 500 and Dow Jones Industrial Average wiped out their 2018 gains as rising yields and increased volatility continued to pressure stocks.

But market whipsaws can be a good buying opportunity for investors able to stomach the volatility. When the market as a whole takes a turn lower, stocks that have otherwise strong fundamentals can get unfairly punished. It can thus be a chance for investors to pick up stocks at a bargain price.

Jim Lebenthal, partner at HPM Partners and "Halftime Report" trader, has used the past week's sell-off to re-balance his portfolio. On Friday, he sold his position in Nike. The stock, which is trading around $64, is up 18.5% over the last year, and Lebenthal believes it's "above where it should be trading." He also trimmed his Qorvo and Orbcomm positions-- the former is up 19% in the past year, while the latter has soared nearly 40%.

Trader: here's what to buy on the dip

But Lebenthal isn't keeping that cash on the sidelines -- he plans to put the money to work in the next week or so. "There are stocks that are on sale...I'm not being trite when I say this is buy low and sell high," he commented on the "Halftime Report."

Specifically, he's looking to add to his positions in Electronic Arts and Greenbrier. Both have fallen over the past week along with the overall market -- Electronic Arts is down 6.5%, and Greenbrier is down 7%. Lebenthal isn't jumping in just yet, since he believes the downturn hasn't run its course. But, he believes the next week is a "great opportunity to fill out these positions."

Lebenthal's also got his eye on a name in the oil patch. "I think oil is still going down, so I'm not pulling the trigger yet on Royal Dutch Shell. But that stock's trading close to book value with a 5.5% dividend yield. To me that's a no-brainer."

Like Lebenthal, Sarat Sethi, a partner at Douglas C. Lane & Associates and "Halftime Report" trader, is also using the market dip to buy stocks. In the financial space he likes Bank of America, JPMorgan, First Republic, and Prudential, since these names will benefit from rising rates.

As a value investor, Sethi researches a company's fundamentals to determine its intrinsic value. He then uses his analysis to see if the market is over- or under-pricing the asset. During times of broader market sell-offs, as has happened in the past week, companies with intact fundamentals may be unfairly punished. This is why "buying the dip" can be a good strategy for some investors.

In the technology space, Sethi is buying Oracle, IBM, Alphabet and Delphi Technologies. He's also adding to his industrial positions--specifically Delta, Fortune Brands, and Masco.

Finally, he believes that some health care names have unfairly sold off.

"Look at Bristol-Myers, Merck and Celgene. Those are on my list of stocks that have come off 5, 10 percent off their peaks and I want to own them."