3 Sectors to Buy While They're Down and 1 to Walk Away From

Key Points

• American Express, KKR, and other financial stocks are trading at multi-year low valuations, and insider buying at KKR suggests the private credit panic may be overdone.
• Healthcare disruptors like Hims & Hers and software names like Figma are showing strong consumer adoption even as Wall Street sentiment remains deeply negative.
• The energy sector, despite being 2026's top performer, may be set for a short-term pullback as FOMO-driven buying creates overextended conditions.

When the S&P 500 was flirting with 7,000 back in January, everyone wanted in. Now, with the index 400 to 500 points lower, the mood has flipped to fear. That disconnect between price and psychology is exactly where contrarian investors Jeff Clark of TradeSmith and Andy Swan of LikeFolio see opportunity.

The setup is simple: risk gets priced out on the way down, not on the way up. Buying at 6,500 is a smarter risk-reward trade than buying at 7,000, even though it feels worse. Clark and Swan are targeting three beaten-down sectors where sentiment has overshot to the downside—and flagging one popular sector where FOMO may be setting a trap.

Financials: Insiders Are Buying What Wall Street Is Selling

The financial sector has been under broad pressure in 2026, dragged down by worries about private credit, interest rate uncertainty, and recession fears. Clark sees that as an opportunity, not a warning.

American Express NYSE: AXP is his top pick. The stock has shed roughly 20% since the start of the year, trading around $300 after hitting a 52-week high above $387 in late 2025. Full-year 2025 earnings per share came in at $15.38, up 15% year over year, and the company raised its quarterly dividend 16%. The fundamentals haven't broken down—the multiple has simply compressed to levels not seen in years.

The private credit space tells an even more dramatic story. Names like KKR NYSE: KKR, Apollo Global Management NYSE: APO, and Blue Owl Capital NYSE: OWL have fallen 25% to 40% from their highs. A few weeks ago, every financial news outlet was running the same negative headlines about private credit stress.

Clark's contrarian instinct kicked in: when CNBC, Bloomberg, and Fox Business all agree on the same narrative, it's worth questioning. At KKR, both co-CEOs stepped up in February and purchased a combined 175,000 shares worth over $30 million. That's not the behavior of insiders bracing for a crisis.

Swan adds Robinhood NASDAQ: HOOD to the financial sector watchlist. The stock ran past $100 last fall when everyone loved it. Now it's pulled back significantly, but LikeFolio's consumer data shows people are still flocking to the platform—opening credit cards, moving 401(k)s, establishing crypto positions. When Wall Street hates a stock but consumers keep showing up, that's the divergence Swan looks for.

Healthcare: Consumer Adoption vs. Regulatory Fear

Healthcare stocks have been beaten down by government spending cuts, reregulation fears, and headline volatility. Clark likes Molina Healthcare NYSE: MOH and Oscar Health NYSE: OSCR as value plays in the space.

But the contrarian standout is Hims & Hers Health NYSE: HIMS. Swan calls it the same type of setup as Robinhood—a stock that ran too hot, pulled back hard, and is now trading at levels that don't reflect the underlying consumer momentum. LikeFolio's data shows accelerating app downloads, growing product purchases, and enthusiastic customer sentiment. The healthcare establishment may not love that Hims exists, but consumers do.

The regulatory noise is real—lawsuits, FDA scrutiny, competitive threats from legacy pharma. Swan acknowledges the volatility but frames it as an opportunity rather than a risk. His analogy: Amazon NASDAQ: AMZN was hated for years because it was going to lose money forever. Netflix NASDAQ: NFLX was dismissed as a fad. The companies that attract consumer gravity tend to win over long time horizons, even when short-term headlines create chaos.

Software: The AI Threat Is Being Exaggerated

The software sector may be the most misunderstood trade in the market right now. The narrative says AI will kill software-as-a-service. Clark says that's the same logic that predicted Google would become irrelevant when AI replaced search engines. Instead, Google's parent company Alphabet NASDAQ: GOOGL pivoted and became the best-performing Magnificent Seven stock over the past year.

Clark points to the iShares Expanded Tech-Software Sector ETF BATS: IGV which has round-tripped back to around $78 after rallying 13% off the same level during his last appearance. He sees another entry forming. Individual names he likes include Microsoft NASDAQ: MSFT, Oracle NYSE: ORCL, ServiceNow NYSE: NOW, and Figma NYSE: FIG.

Figma is the contrarian case study. The design platform has plunged roughly 82% from its post-IPO peak, trading around $21 against a 52-week high near $143. Swan sees Figma as a direct beneficiary of the "vibe coding" revolution—the wave of non-developers using AI tools to build apps and digital products.

Revenue grew 40% year over year in Q4. The consumer adoption signal is strong even as Wall Street has written the stock off.

Swan's broader point resonates: AI doesn't kill software. AI is software. It makes existing platforms more powerful, more useful, and more accessible. The companies that adapt will emerge stronger, not weaker.

Energy: The 1 Sector to Avoid Right Now

Here's where the contrarian knife cuts the other way. Energy has been the best-performing sector in 2026 after being the worst in 2025. Oil and gas stocks have been on a tear, and the FOMO is palpable.

Clark isn't necessarily bearish on energy long term. He thinks many of these stocks could be higher a year from now. But over the past several weeks, the sector has gotten ahead of itself. Too many investors are chasing momentum, and that kind of crowded positioning tends to unwind painfully.

Swan agrees, but offers a tactical approach: build a watchlist now and be ready to buy the pullback. He mentions Oklo NYSE: OKLO as one name on his radar—an energy infrastructure play tied to the data center buildout. Rather than chasing, he suggests selling puts below current prices to collect premium while waiting for a better entry.

Contrarian Thinking Means Being Uncomfortable

The pattern across all three bullish sectors is the same: fundamentals are holding up or improving, but sentiment has cratered. That gap between price and reality is where Clark and Swan operate. It's not comfortable. It requires buying what everyone else is selling and avoiding what everyone else is chasing. But as Clark puts it, if everybody liked his ideas, they'd be the popular ones—and they probably wouldn't work.