Laggard

Written By:
Paul Tracy
Updated September 30, 2020

What is a Laggard?

Laggard describes a stock that fails to perform as well as the overall market or a group of peers.

How Does a Laggard Work?

In a broad sense, the term laggard connotes resistance to progress and a persistent pattern of falling behind. In a financial sense, a laggard may be a stock or other market-traded security that has historically underperformed on a consistent basis. For example, if biotechnology stock ABC consistently posts annual returns of only 2% when other stocks in the industry post average returns of 5%, stock ABC would be considered a laggard.

Why Does a Laggard Matter?

If you hold them in your portfolio, laggards are generally the first candidates for selling. In the example above, holding a stock that returns 2% instead of one that returns 5% costs you 3% each year. Unless there is some solid reason to believe that a catalyst will lift shares of a stock that has historically lagged its competition, continuing to hold the laggard costs you money