What to Do When Analysts Change Their Mind

The stock market can be a nerve-wracking place. If investors own shares of Netflix or RadioShack, they know all about the market's so-called mood swings. Investors have watched shares of Netflix fluctuate over the past few days with 10% swings in both directions. RadioShack shareholders, meanwhile, recently saw their shares rise 12% after a tough year of declines. These share-price movements are largely driven by analysts' buy and sell recommendations, and it's important for long-term investors to exercise discretion when reacting to these large moves.

Don't react: Manage your expectations
The large moves in Netflix's share price haven't changed the fundamentals of the business. Netflix still competes with large players Apple, Amazon.com, and Google to attract consumers. Right now it appears there will be a content war, as consumers can switch platforms easily to get the content in demand. The question is whether Netflix will be able to compete with such large balance sheets. 

Yet it's important to not get caught up in the day-to-day hype when investing for the long term. If these fluctuations are giving you indigestion, it's probably a good time to evaluate your expectations. You should be aware of why you have ownership in a company and what kind of events would cause you to exit your position. If you're not comfortable with the expectations you have set for a company, consider sitting down and re-evaluating your positions.

See more in the following video.

Are you feeling uneasy about the precipitous drop in Netflix shares since the summer of 2011? While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These kinds of issues are a must-know for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to both buy and sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.

Blake Bos and Isaac Pino have no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, Google, Netflix, and RadioShack and is short RadioShack. Motley Fool newsletter services recommend Amazon.com, Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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