Fundstrat’s Tom Lee Sees ‘Violent Rally’ in February — Here Are His Top 3 Sectors for Enterprising Investors

But not everyone is so bearish. For instance, Tom Lee — co-founder and investment chief of Fundstrat Global Advisors — is calling for a sharp recovery as early as this month.

“The setup looks like the ‘V’ for February is not Valentine’s, but violent rally,” Lee told CNBC on Monday.

The Wall Street strategist points out that recoveries from fast sell-offs are “typically symmetric,” suggesting that investors should expect a fierce near-term rally in response to the sharp January decline.

“I think we are in an easy risk-reward for the month of February,” he adds.

Among all the stocks that could rebound, Lee likes this group the best: Bitcoin-related equities, energy stocks and FAANG — a trio he calls “BEEF.”

Sign up for our Moneywise newsletter to receive a steady flow of actionable ideas from Wall Street's top firms.

Bitcoin-related equities

Lee has long been a proponent of cryptocurrencies. In October 2021, he said that the price of bitcoin could soar to as high as $168,000.

While bitcoin has pulled back over 20% year to date — it now trades at around $37,500 apiece — Lee still considers it as one of his top plays.

He likes bitcoin over other cryptocurrencies because it’s highly liquid and relatively safe from a regulatory perspective.

“We know that in February there may be some Executive order coming from the White House, and that might make bitcoin a lot more appealing,” Lee said.

Investors can buy bitcoin directly. But there are several publicly traded companies that have tied themselves to the crypto world.

Enterprise software technologist MicroStrategy purchased approximately 660 bitcoins between Dec. 30, 2021 and Jan. 31, 2022, bringing its total bitcoin count to 125,051 — a stockpile worth roughly $4.7 billion.

Investors can also check out Coinbase, which runs the largest cryptocurrency exchange in the U.S. It earns a transaction fee every time someone buys or sells on the platform.

MicroStrategy and Coinbase shares are down 40% and 28%, respectively, year to date. If bitcoin makes a comeback, these stocks will likely spike in step.

Energy stocks

Lee has been very bullish on energy stocks over the past year, even telling investors last summer to HODL — an acronym for “hold on for dear life.”

And he’s been bang-on. Fueled by rising energy prices, energy was the S&P 500’s best-performing sector in 2021, returning a total of 53.4% vs the index’s 28.7% total return.

The sector’s upward momentum has carried into 2022.

While the broad market is deep in the red so far this year, energy stocks keep on climbing.

The Energy Select Sector SPDR Fund (XLE) is already up 18.5% year-to-date. Oil giants like ExxonMobil and ConocoPhillips are up more than 20% in 2022.

FAANG

FAANG, which stands for Facebook (now called Meta Platforms), Amazon, Apple, Netflix and Alphabet, is another group that Lee is bullish on.

As the largest players in their respective verticals, these mega-cap tech stocks have been in high demand for years. But a few of them are getting pummeled at the moment.