Beware of Laggards in Your Portfolio

Physician's Money Digest, August 2006, Volume 13, Issue 8

Investor's Business Daily

Most financial advisors will tell a physician-investor that one sure key to investmentsuccess is to put most of your moneyin stocks that are leaders in a group that'sset to explode. However, there are somestocks in these groups that lag behind andarrive to the party late, and these stragglersshould be avoided at all costs.gives the exampleof home-building stocks, whichaccrued big gains in 2003 and 2004, butnot every stock in that group arrived onthe scene on time and missed the heftyreturns, including companies such asDominion Homes and Comstock Homebuilding.While many builders saw boomingsuccess, such as Toll Brothers, whichrose 73%, Dominion Homes saw its stockdrop 17% in 2004. Meanwhile, ComstockHomebuilding started off decently, goingpublic at $16 per share and soaring to $31by the end of February 2005. But this cameat the tail end of the cycle, and the entirehomebuilding group started to take adownward slide in the beginning of March2005. Today, Dominion and Comstock haveseen their prices drop significantly. FromAugust 2005 to February 2006, Dominionfell about 55% and Comstock sank about63%. And while the leaders are down aswell, they didn't experience a drop nearlyas steep as the laggards.