The finance or financial industry often has numerous terms to describe an individual or company’s actions. “Buck the trend” is one such term, which means an individual is outperforming a poor securities market or a company’s stock is doing better than the status quo. In most cases, the term applies when an overall market is in decline or a group of securities are in constant decline. An investor can buck the trend by finding stocks or companies doing well despite the prevailing cycle. Those who can make money in down markets are often valuable individuals who can provide information for other investors.
Technical analysis uses a stock’s chart history to define future movements in price. Investors use charts to buck the trend for individual stocks. For example, a stock’s price may be decreasing simply because the poor market is dragging the price down due to increased stock sales. Investors who pick up on a trend in the chart may go long in hopes of a future stock price rise; this is also known as being bullish. If the stock turns and begins to increase in price, the investor bucks the trend and will begin to make money once it begins its price increase as he or she bought the stock at a low price point.
Investors also buck the trend by applying this mentality to an entire industry. In most downturns, certain industries begin a downward price trend first. This can be the result of lower consumer purchases or contraction by these firms to shore up profits in poor economic times. An investor can remain bullish, however, by purchasing stocks at low price points because he or she knows these typically stable companies will come back strong after the downturn. Many different industries can be in this predicament based on the current economic conditions.
Another way to buck the trend is to use fundamental analysis when purchasing stocks in poor markets. Fundamental analysis looks at the company behind the stock rather than just at a stock’s price movements. Companies with strong clientele, good products, favorable cash positions, and solid infrastructure often weather poor economies. These companies tend to have stable earnings that allow the company’s stock to be popular among investors. Buying stocks from these companies usually results in successful investing and allows investors to buck the trend by looking for good companies rather than good stocks.