From Coinpedia · By Qadir AK
Tom Lee believes last week’s stock market sell-off may have marked a bottom as stocks recovered despite negative news. However, investors may still need to be careful about which stocks they hold as several major companies are trading near their all-time highs.
Advertisement The S&P 500 is trading at 17.7 times expected earnings, above its long-term average of 16.4. While the recent market decline has brought some prices down, not every stock has become attractive.
The four stocks to consider reducing are Apple, Johnson & Johnson, Walmart, and Coca-Cola. Texas Instruments and Altria remain on the hold list.
Why Tom Lee Thinks the Stock Market Has Bottomed
Tom Lee pointed to two signs behind his positive market outlook.
First, stocks recovered despite negative news involving Nvidia and Elon Musk’s companies. He believes this shows that buyers are still willing to enter the market even when uncertainty remains.
Second, the VIX futures structure returned to normal after turning negative last week. Lee sees this as another possible sign that the market has reached a bottom.
However, a market recovery does not mean every stock is worth buying or holding at its current price.
4 Stocks to Reduce
1. Apple Stock (AAPL)
Apple stock is trading around $350, up 29% in 2026. The company reported $115 billion in quarterly revenue, an increase of 12% year over year. Its annual free cash flow also reached a record $136 billion.
Despite its strong results, Apple stock trades at around 37 times expected earnings, compared with its five-year average of 29. Its current valuation leaves limited room for further gains.
The valuation estimate puts Apple’s fair value at around $272, assuming annual cash flow growth of 10%.
Consider reducing holdings near $350 and watch the $270–$280 range for a better entry point.
2. Johnson & Johnson Stock (JNJ)
Johnson & Johnson stock has gained 36% in 2026 and is trading around $280. Strong sales of newer drugs helped the company deliver results, while management raised its full-year earnings outlook to $11.05–$11.15 per share.
However, the stock has become expensive compared with its historical valuation. It trades at 25 times expected earnings, against its five-year average of 16.
The three valuation estimates put its fair value between $188 and $220, with an average of around $200.
Consider reducing holdings near $280. The $200 level is where the valuation becomes more attractive.
3. Walmart Stock (WMT)
Walmart stock is up 30% in 2026 and trades around $126. Its online business continues to grow, with global e-commerce sales increasing 23% and advertising revenue rising 38%.