Ben Clark’s 6-point checklist for holding through a selloff - and 2 stocks making the cut

“This is when outsized returns are made - when you’re prepared to go against the tide and run into the fire, not away from it.”

That was TMS Capital’s Ben Clark's message to Livewire readers earlier this year as investors fled software stocks. The article became one of Livewire’s most-liked of the year.

Microsoft (NASDAQ: MSFT) and Pro Medicus (ASX: PME) were among his buys. Once priced for seemingly endless success, both were hammered when fears of AI disruption took hold. Microsoft fell 33% from its 2025 peak to its 2026 trough. Pro Medicus lost roughly twice as much.

Both have since rewarded Clark’s conviction, with Microsoft reaching a record high in early October and Pro Medicus testing $200.

Buying those falls looks straightforward in hindsight. Living through them was another matter. When prices tumble, analysts slash targets and headlines challenge your investment case, nerves fray. The latest selling across the AI trade, Google and ASX small caps is testing investors’ resolve all over again.

What gave Clark the confidence to buy and hold while the market offered so many reasons to sell?

Using Microsoft as a case study, Clark outlines a six-point checklist for buying into a selloff and holding your nerve. He also shares two other stocks making the cut - and one longstanding holding he has recently sold.

1. Has the business changed, or is the whole sector being sold?

The breadth of the software selloff was the first thing that caught Clark’s attention. 

“The thing that really stood out to us when that software selloff was happening was it was completely across the board, which gave us confidence that the market had become irrational,” he says.

Investors were treating companies with different products, customers and competitive positions as though they faced the same outcome. 

“Not every software company is going to be disrupted, and even if they are going to be disrupted, they’re not all going to be disrupted at the same speed.”

That lack of discrimination during the “SaaS-pocalypse” prompted Clark to investigate whether the market’s conclusion made sense for the companies he owned.

Key lesson: Ask what has actually changed at your company. Is its operating performance deteriorating, or is the market applying a sector-wide fear to businesses with very different prospects?

2. Start with the highest-quality businesses caught in the selloff

Once Clark recognised how indiscriminate the selling had become, he had a starting point for investors looking for opportunities: the sector’s highest-quality businesses. 

“Often when you do see these sort of events happen, the ones you want to look at are the highest quality businesses in that sector,” he says.

For TMS, that meant revisiting Microsoft, a company it already knew well. “That’s why we did more work on Microsoft, which is the biggest software company on the planet.” 

Clark had owned the stock for years, and the selloff presented an opportunity to increase the position and introduce it to other client portfolios. “It was more we were sort of adding to it and buying it for some new clients.”

Key lesson: Put the sector’s strongest businesses at the top of your research list. Then investigate whether the selloff has created an attractive opportunity to own them.

3. Can the balance sheet withstand you being wrong?

Holding your nerve requires some humility about what you can know. Clark’s assessment allowed for the possibility that his investment case would prove mistaken. 

One of his first questions concerned debt: “Does it have too much debt and it could become a problem if we get this wrong? Because we didn’t know the answers back then. No one could have.” That uncertainty made Microsoft’s financial strength particularly important. 

“Microsoft has a higher credit rating than the United States government,” he says. 

The balance sheet gave Clark reassurance that the company had the financial flexibility to navigate a difficult period while the impact of AI became clearer.

Key lesson: Ask what happens if you are wrong. Can the company service its debt and withstand a tougher trading environment without its financial position becoming part of the problem?

4. Does the price give you room for error?

After the balance sheet came valuation.

“At its low point, I think it got down to a PE of about 13 or 14 times,” Clark says of Microsoft.

 “So even if you were wrong, there was room for error, given the state of the cleanliness of the balance sheet.”

The two checks worked together. Financial strength provided reassurance about the company’s resilience, while the price offered some allowance for uncertainty.

The starting valuation also helps explain why he sees different opportunities across the software market. He believes some Australian companies entered the selloff at excessive multiples. “I think the Australian investors were overpaying for these businesses,” he says.

A large decline therefore needs to be assessed against the company’s earnings prospects. The distance from its previous high cannot establish whether the shares are cheap.

Key lesson: Does today’s valuation allow for a less favourable outcome? Look for room to be wrong, rather than assuming a steep fall has created a bargain.

5. Is real-world evidence still supporting your investment case?

For his next check, Clark drew on a lesson from legendary American investor Peter Lynch’s Beating the Street: pay attention to what is happening around you. 

“Often the best ideas are in front of you,” Clark says.

At TMS, the evidence was in the tools his colleagues used every day. “Over the last 12 months at our tiny little company, TMS, we have gone all in on the Microsoft ecosystem.” That included Teams, security services and Copilot. “Copilot is going ahead in leaps and bounds and has completely revolutionised the way that we’re working.”

Conversations outside the business reinforced the observation. “Everyone we were talking to in our industry and in other industries were doing the exact same thing.” 

Then came the spending figure that made the market’s pessimism particularly difficult for Clark to reconcile. 

“What we pay Microsoft today is more than five times what we were paying them as a business a year ago, and yet the market was saying that the business was doomed.”

Key lesson: Look for concrete evidence of customer behaviour. Are customers abandoning the product, spending less or finding more reasons to use it? Test your conviction against what is actually happening.

6. Is management responding - and delivering results?

Customer behaviour was one source of reassurance. Management’s response to AI was another. In discussing why U.S. software shares had recovered more strongly than their Australian counterparts, Clark pointed to the speed of investment and execution.

“The American software businesses have been far more aggressive in pivoting into AI and in using AI to actually accelerate their businesses - they spent more aggressively and they spent that money faster.”

Clark also credits those companies with explaining their strategies sooner, giving shareholders a clearer understanding of where the money was going and how it could support growth.

Key lesson: Look for a credible response to the threat, backed by execution. Can management explain its strategy, and are results beginning to support it?

Two stocks making the cut

Those checks help explain how Clark finds opportunities when share prices get beaten down. With selling spreading to other parts of the technology trade, where is he putting money to work?

Beyond Microsoft, two examples stand out: Mastercard, which he added to earlier in the year amid concerns about consumer spending, and Nvidia, a more recent purchase following the semiconductor selloff.

1. Mastercard (NYSE: MA): consistent earnings, periodic market doubts

Mastercard is a longstanding holding that Clark describes as “one of the most consistent businesses on the planet alongside Visa”.

Earlier in the year, investors were concerned about consumer spending amid inflation and cost-of-living pressures. Clark’s assessment was that people were still spending more, even if they were unhappy about where their money was going.

“They’re just not spending it on the things they want to be spending it on because of inflation. So it’s still good for Mastercard.”

That resilience shows up in its long-term earnings trajectory. “It almost looks like someone’s artificially drawn the line because there’s almost no bumps in it,” he says.

The share price, however, can periodically disconnect from that performance. Mastercard fell to around $470 in June before rebounding to a record $638. Clark added to TMS’s position earlier in the year as investors worried about consumer spending.

He had seen similar doubts before. TMS first bought Mastercard when investors feared Bitcoin would replace it and Visa—a concern he described as “illogical”.

“Bizarrely, the share price does go through periods where it can seriously disconnect,” he says.

2. Nvidia: a slowdown already in the price?

Nvidia (NASDAQ: NVDA) is a more recent purchase following weakness in semiconductor stocks. Clark believes memories of the industry’s historical cyclicality are contributing to concerns about how far the current spending cycle has run.

His assessment of demand is more constructive. His colleagues recently visited the US and China, meeting companies and fund managers. 

“The overwhelming message is that this spend is not going to decelerate - the hyperscalers are not going to take the foot off the accelerator."

He points to substantial capital expenditure plans among the major technology companies.

Against that spending outlook, Clark believes Nvidia’s valuation already prices in a slowdown. He cites a consensus FY2028 price-to-earnings multiple of 13 times, bringing the opportunity back to a key checklist question: how much room does the price leave for disappointment?

“I think it looks interesting. We’ve started buying some. It’s where it was a year ago and the earnings are 60% higher than where they were a year ago.”

One on the way out: APA

Clark has exited APA (ASX: APA), one of the portfolio’s longstanding “sleep at night” holdings. His concern is valuation, particularly the income available relative to cash.

“It’s doing everything that it should,” he says. But he struggles to reconcile its share-price strength with the interest-rate environment. “If you buy it today, you’re basically getting the same return in income as you can get in a bank account.”

Clark says APA has historically tended to offer a distribution yield around two percentage points above cash. With that premium diminished, he believes the shares look expensive. “That’s one that looks really expensive to us at the moment.”

The sale also forms part of a broader reduction in Australian market exposure in favour of the US.

The checklist still leaves room to wait

One company I was particularly curious about was Google parent Alphabet (NASDAQ: GOOG), which shed US$505 billion in market value after last week’s earnings reignited concerns about the future of search.

Was this another opportunity to run into the fire?

Clark’s response was measured. Google remains a sizeable, longstanding holding, but he acknowledges that concerns about search are valid, with revenue growth falling short of expectations.

“It’s not like revenue is falling, it’s that the rate of growth is slowing,” he says.

Part of the challenge, he explains, is Google’s own AI search functions taking business from traditional search before being fully monetised. Other parts of the company, including cloud, could help compensate, but the transition will take time.

“The handover is not going to be seamless. And I think that’s where the market’s worried.”

Before accumulating additional shares, Clark wants more clarity.

“For those who don’t own Google, I don’t think it’s a buy yet. I think with these sort of things, you want to let the dust settle and get a sense of it all.”

It’s a useful final lesson: even when you retain conviction in a longstanding holding, a falling share price doesn’t necessarily mean it’s time to buy more.