Buying the Broken: How I Target Beaten-Down Quality Stocks

by Chris Pulver | Sep 11, 2026

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There’s something powerful about buying quality when it’s been completely obliterated.

I’m not talking about dumpster diving through failing companies or chasing speculative nonsense. I’m talking about fundamentally strong businesses that get swept up in sector weakness and dragged down 50% or more — despite solid underlying metrics.

That’s the setup I’ve been positioning for with AppLovin (APP), which is down roughly 60% from its highs. So let me explain how I approach extreme drawdown opportunities when the data suggests the selling has gone too far.

The Criteria for Buying Severe Drawdowns

Not every beaten-down stock deserves your capital. The key is distinguishing companies caught in broad sector weakness from those facing genuine fundamental deterioration.

I look for stocks down 50% or more from their highs, a discounted cash flow model showing substantial upside, healthy cash flow and revenue generation and a clear runway for future growth. I also want evidence that the decline came from sector contagion rather than company-specific problems.

That creates a stronger fundamental outlook than simply buying a stock because someone labeled it an AI or quantum-computing play. Narratives can attract attention, but cash, revenue and execution give a business the ability to survive volatility and compound over time.

With APP, the discounted cash flow model suggests significant upside despite the steep decline. The fundamentals remain intact, but the stock got caught in the broader software sell-off alongside holdings in the iShares Expanded Tech-Software Sector ETF (IGV) and the SPDR S&P Software & Services ETF (XSW) — part of the AI-disrupted software space that’s been under pressure.

My thesis is simple…

If the discounted cash flow model is anywhere near accurate, a bid should emerge somewhere. I want the opportunity to buy low without assuming I know exactly where the bottom is.

The Multi-Level Entry Structure

When a stock is this beaten down, I don’t try to time the bottom perfectly. I structure multiple entry levels so I can participate if it catches a bid while preserving room to act if volatility drives it lower.

For APP, I’m looking at two distinct levels: one around $300 to $310, and another at $180 to $190 if we revisit Liberation Day-type lows. Both entries are structured as $4.00 debits targeting $6.00 credits.

This approach gives me exposure if the stock bounces from the first zone while allowing me to add at a substantially lower valuation if the selling continues. It turns uncertainty into a risk-management framework rather than forcing an all-or-nothing call.

This strategy only works when you’re buying real businesses with real fundamentals. The market will eventually expose AI-bubbly companies with no revenue. That’s not what this is about.

This is about finding quality that’s been thrown out with the bathwater — then using defined risk and multiple entry points to pursue the recovery without trying to be a hero and pick the exact bottom.

I’ll see you in the markets.

Chris Pulver
Chris Pulver Trading

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