Investors are often told to pay attention to what the market is saying. If a share price is falling, the market is clearly worried about something and you should find out why.

But what if the market is wrong? Having conviction in a stock declining in value takes a lot of guts and determination. Holding onto the shares can be risky but also a good reminder to look at the facts and decide if the pros outweigh the cons.

You must consider if the valuation is cheap or expensive versus what’s expected from the company, and to remember that investing is about taking a view about what could happen to a business over the coming years, not months.

Quite a few UK fund managers have been extolling the virtues of Rolex seller Watches of Switzerland (WOSG), despite the share price having been on a downward path.

Their persistence was vindicated on 13 July when the company said everything was going well. The share price jumped 11% on the day and has continued to tick higher.

After doing well during 2020 and 2021 when watch sales beat expectations during the pandemic, the shares pulled back in 2022 and again for the first half of 2023. Part of the collapse was down to an equity derating.

Investors were worried that stellar growth could not be sustained and the company hinted in May that growth could moderate.

So why did numerous fund managers stand their ground and hold onto the stock? It’s all down to the longer-term opportunity and the fact the shares are cheap compared to the growth on offer, even if growth does slow down. They trade on 13.3 times forecast earnings for the year to April 2024. Pre-tax profit is forecast to grow by 16% this year and by 17% the following year.

Talking to Shares before the latest financial results, Guy Anderson from Mercantile Investment Trust (MRC) said the sustainability of growth was a valid concern for investors. However, the reason he was sticking with the shares was the potential to be a bigger player in the US where it is ‘still only touching the surface when it comes to market share’.

Richard Bullas holds the stock in the Martin Currie UK Mid Cap Fund (B7BXT54) and told Shares that market share gains in Europe and the US coupled with underlying growth of mid-single digits for Swiss watch exports gives him ‘confidence in the shareholder value that the management team can still create’.

Abby Glennie from Abrdn UK Smaller Companies Growth Trust (AUSC) is another fund manager staying a loyal supporter. ‘We can think of few, if any, retailers globally which benefit from the extent of waitlist for their products that Watches of Switzerland enjoys. This provides valuable visibility to revenue streams,’ she said.

‘While there have been some headwinds around jewellery demand and the interest free credit environment, the demand Watches of Switzerland has seen has proved resilient despite the headline of tougher times for consumers. We believe these headwinds are shorter term negatives, and the medium-term investment case remains intact.’

Investors should take comfort in fund managers sticking with a position if the investment case hasn’t changed – it shows they can rise above market noise and not be swayed by market sentiment and end up following the herd. It’s worth doing the same with your own portfolio.

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