When Your Stock Ideas Lag…

stock ideas lagSometimes your stock ideas flounder. Read this post when your stock ideas lag…

Sometimes, your stock ideas lag. And it sucks.

You know the feeling, right?

Everybody else on your Stocktwits stream is pumping their fists and ringing the bell. They don’t have a care in the world. Their portfolios are greener than fresh sod.

And your biggest positions are bleeding out, with no end in sight…

“My Current Stock Idea is Lagging – What Do I Do?”

Recently, I featured (NASDAQ:IQNT) as a potential stock idea. Unfortunately, while 79.33% of stocks were making higher highs today, I focused on the 1 in 5 that floundered. Ouch.

In this case…

IQNT has seen a huge decline in volume over the last couple of weeks. Trading volume has been anemic. And as a thinly traded issue in the first place, IQNT hasn’t had a positive news catalyst to alter this short term trend. If you think about it….

IQNT has come down about 20% in the last two weeks without, any big changes to the fundamental story or valuation. When things stabilize a bit, or the price drops low enough to see some violent buying, I may add to my position. The only other factor you want to consider in this decision is, of course…

Your investing time frame!

Makes sense, right? If you are counting on cashing out your investments for retirement in the next couple years, you may not want to dollar cost average on a lagging stock idea. But if you can be patient, and stomach the volatility, it might present a buying opportunity.

Other Reasons Stock Ideas Lag:

There are a ton of other reasons stock ideas lag aside from a lack of volume and interest. But here’s the thing, understanding why your stock pick is under-performing can really help give you some context into whether or not you should sell your stock, buy more or sit tight. So…

Here are some more reasons your stock idea might be lagging…

One reason your stock idea lags is because your sector of choice is out of favor with investors. Junior gold miners, for example, have gotten beaten down because of disfavor with investors. The value relative to the underlying commodity has really diverged. At some point this becomes a bottom. But it’s a very bumpy process. So be careful, buy small positions at a time, and think critically.

stock ideas lag

Junior gold miners are out of favor with investors

A change in the fundamentals might be another reason your stock idea is lagging. It can also be more calamitous. If a clinical trial result, an oil spill or any other major event has occurred you need to factor this into your analysis (because the market sure is!) To avoid surprises make sure you listen to conference calls and follow the news on your investments.

It’s irresponsible not to. And by the way…

As much as fundamentals can hit your stocks, they can hit also hit the market too. The financial crisis is the most recent example. If credit dries up between banks, everybody suffers, right?

That said, if you’re investing for the long term then you are probably optimistic things will improve (and in the short term the federal reserve¬†“should” provide you liquidity). All good, right?

By the way, I’m assuming your stock idea doesn’t suck! I am assuming you are buying under valued assets using a systematic investment assessment framework. So…

Now that you know why your stock idea is lagging…

Here’s How To Avoid Lagging Stock Ideas:

It sucks when your portfolio deflates alongside an improving market. But if you’re careful you can manage your risk and keep the perspective in decline. You can usually weather the storm. For example…

One practical way you can protect yourself from lagging stock ideas is to buy index funds. These are a great hedge against uncertainty at large

If you are going to pick your own stocks and research your own investment ideas, you need to be systematic in your approach. Here’s what I mean…

You should make informed investment decisions by using something like an investment idea checklist. This ensures that all of your stocks meet a certain benchmark that ensures your margin of safety. This is the ultimate way to cope with lagging stock ideas. It’s much easier to hold on to an undervalued asset than a speculative high flier.

You should also get in the habit of looking out for problems in advance. As Charlie Munger¬†says, “invert your ideas!” If you think a stock is going to go up, look for reasons why it could go down – you see what I mean?

Being proactive and armed with a solid game plan can really help youwhen your stock ideas lag.

How Do You Cope When Your Stock Ideas Lag?

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