12 May Tom Lee sees a ‘V-shaped’ recovery and getting long these ‘washed out’ stocks
With stocks on the path toward a “V”-shaped recovery, Fundstrat co-founder Tom Lee sees a handful of names worth grabbing. Stocks have staged a recovery rally since selling off on the initial unveiling of President Donald Trump’s plan for steep tariffs last month. The latest leg up came on Monday after the U.S. and China agree to slash tariffs for 90 days following weekend trade negotiations. “Equities have staged a V-shaped recovery, which is what we argued would take place as this is the pattern after a waterfall decline in stocks,” Lee wrote to clients in a Monday note. “And despite the continued improving news flow, investors remain skeptical, which is positive.” The S & P 500 briefly dipped into bear-market territory — which marks a decline of at least 20% from a recent high — amid the initial bout of panic selling. Now, the broad index is up more than 2% since April 2, when Trump first unveiled the broad levies. .SPX YTD mountain S & P 500, year to date Lee told CNBC on Monday that the market’s movement in a “waterfall” formation after the tariff announcement signaled a “V”-shaped recovery would be ahead. That’s because most waterfall slides historically in the market give way to a “V” rather than a “W,” which would mean stocks might be in for another significant decline. “The stock market did have a liquidation event,” Lee said on CNBC’s ” Power Lunch .” “But waterfall declines — all …17 out of 18 since 1950 — had a V-shaped recovery. So we knew that whenever the bottom was established, the bottom would be a V shape.” Despite these reasons for optimism, Lee noted that traders continue to show high levels of pessimism. He pointed to the American Association of Individual Investors’ sentiment survey , which last showed more than 51% of members being bearish of the stock market over the next half-year. “At some point, the macro skeptics will have to acknowledge that conditions are improving,” he wrote to clients. “Markets can look through a weak quarter or two due to trade disruptions.” ‘Washed out’ plays With confirmation signals favoring the “V”-shaped recovery and the bull market showing it can stay intact, Lee compiled a list of “washed out” large-cap stocks that investors can consider picking up amid the rebound. The idea is that equities likely saw most of the pain between mid-February and early April, so investors should look for names that struggled before the tariff-induced plunge. Tariffs may have just given stocks the final leg down to reset and then recover, he said. To find these picks, Lee screened for stocks with market caps above $15 billion that declined more than 30% before Feb. 18 . Mid-February was the last time the S & P 500 traded at all-time highs. He then looked for stocks that didn’t make new closing lows between April 1 and 8, the period containing Trump’s initial announcement that sent stocks cratering. Stocks must also be currently down more than 25% from respective 52-week highs to make the list. Here’s 10 large-cap names that made the cut: Lululemon was one name that met the criteria. The athletic wear retailer has tumbled more than 21% in 2025, but surged more than 7% amid Monday’s rally. The majority of analysts polled by LSEG have buy ratings on the stock. The typical price target implies shares can gain 11.5% over the next year. Elsewhere, Super Micro Computer was one of several tech stocks on the list. Super Micro shares have jumped nearly 10% despite 2025’s rough start, helped in part by Monday’s gain of more than 4%. The typical analyst has a hold rating on the stock, per LSEG. However, the average price target reflects the potential for shares to run up more than 20%.