Sometimes a stock you really like just lays an egg. That’s Mr. Market for you. Stocks of companies will go up and go down for no good reason. Here are some reasons they may go down:
- Buyers like something else better
- There’s been no news on the company in a while
- It’s a bear market.. i.e. everything is down
- Insiders are taking some profits, making Mr. Market ask why?
- There’s a full moon tonight
The market buys and sells for all kinds of reasons. But as Warren Buffett says: “In the near term the market is a voting machine, in the long term it is a weighing machine.” In other words, the market will eventually catch up with the reality of a company and either buy or sell accordingly.
Which brings me back to my post title about patience. Sometimes the market just dishes out shit burgers and you have to have the patience to either eat or do nothing until the stock becomes overvalued or something significant changes about the fundamentals.
There are some stocks that go down because something is wrong, and other stocks that go down even when nothing is wrong. Here are some things you can do to tell the difference:
- Look up news about the company. If the recent news is negative, decide if you agree with what’s being said.
- Check out the financial numbers last released by the company. Anything change? Is the stock worth replacing because of it?
- Have insiders been buying or selling the stock? Buying is usually positive for the stock while selling doesn’t usually mean a whole lot. Decide if what you are seeing is negative for the stock.
Otherwise, have patience. The stock will do what it’s going to do until the market catches on and it takes off for no good reason. Then it’s possible you want to take some profits or just sit tight. It’s up to you.