All stocks, no matter how well they perform in the long run, will have short-term dips.
That's why it's imperative to not get distracted by these fluctuations.
In fact, if the quality of the business' future prospects hasn't changed then those stock price plunges present the perfect buying opportunity.
The team at QVG Capital had two such examples in its latest memo to clients:
Bad news is already priced in
International student services provider IDP Education Ltd (ASX: IEL) had a shocker last month as the stock price plummeted 22.5%.
The QVG analysts explained this was due to reforms in the Canadian education market.
"IDP education is now expected to lose market share for its English language testing in Canada due to the introduction of competition."
However, the team is keeping faith in IDP Education through this crisis.
"While this is a permanent change, we believe it is both quantifiable and reflected in the share price."
Most of QVG's peers agree.
According to CMC Markets, a whopping eight out of 10 analysts currently rate IDP Education shares as a buy. Moreover, seven of those professionals think it's a strong buy.
The IDP share price is now 17.25% lower year to date, while it has lost 7.5% over the past 12 months.
The market is missing the point about this retailer
Budget jewellery retailer Lovisa Holdings Ltd (ASX: LOV) was the darling of the ASX last year as the stock more than doubled between June and January this year.
Then in May it tumbled 22.5%, which remarkably is the same percentage as IDP Education.
There was no company-specific news contributing to the fall, but more of a general fear about consumer discretionary goods.
"Lovisa also detracted as it appears to be impacted by tougher retail conditions emerging in Australia."
QVG analysts reckon this is entirely missing the point about Lovisa's explosive expansion potential.
"We expect some level of 'per store' profit impact but realise that the bigger driver of value is how many stores they will eventually operate," read the memo.
"We don't believe 'per store economics' are permanently impaired and see near term trading weakness as a [buying] opportunity."
Even after the recent dip, the Lovisa share price is still almost 50% up compared to a year ago.
