An Underperforming Stock is not keeping pace with the broader market. The underperform rating can have varying meanings depending on the brokerage firms issuing the rating; it is sometimes called a weak hold or moderate sell. However, regardless of what name is given to this type of stock, it generally means that investors believe there are better opportunities available in other investments.There are a number of reasons why a particular stock may be underperforming. It could be that the company has released disappointing earnings results, or there could be negative news surrounding the company that is causing investor confidence to decline. In some cases, an underperforming stock may simply be caught up in a broad market sell-off even though there is nothing specific wrong with the company itself.Investors who own an underperforming stock may want to hold onto it if they believe that its current price represents a bargain relative to its true value. On the other hand, if they think that further declines are likely then selling might be the best course of action.
