Most investors say they want long-term returns.
Very few are willing to sit through the part that actually creates them.
Sideways stocks are uncomfortable. They don’t give you dopamine. They don’t validate your thesis in real time. They don’t make for flashy screenshots. And because of that, they’re often ignored, abandoned, or sold right before they matter most.
But in reality, sideways price action is often where the opportunity is being built.
Time Is the Ingredient Most Investors Underestimate
Markets reward patience far more than precision.
When a stock trades sideways, two things are usually happening beneath the surface:
The business continues to execute
Expectations reset or remain low
That combination is powerful.
Time allows fundamentals to catch up to price. Revenue grows. Margins improve. Cash flow compounds. Meanwhile, the stock doesn’t move much — not because the company is failing, but because the market isn’t paying attention.
This is how valuation gaps close quietly, not explosively.
The irony is that most investors say they want “undervalued” stocks, but the moment a stock stops moving, they assume something is wrong. In reality, boring price action often signals that risk is being reduced while upside remains intact.
Boring Price Action Filters Weak Hands
Sideways markets act as a natural filter.
Short-term traders get bored. Momentum chasers move on. Even long-term investors begin to question themselves when nothing happens month after month. But businesses don’t operate on daily candles. They operate on quarters and years.
If your thesis is rooted in business execution, sideways price action shouldn’t break it — it should strengthen it.
This is where conviction is actually tested.
Anyone can hold a stock when it’s ripping higher. Very few can hold — or continue adding — when the chart is doing absolutely nothing.
Real Examples From My Portfolio
Some of the most important positions I’ve built came during long stretches of frustration.
$PYPL is a great example.
For a long time, sentiment around PayPal was brutal. The stock went nowhere. Headlines focused on competition, slowing growth, and narrative decay. But underneath the noise, PayPal continued to generate massive free cash flow, buy back shares, and maintain a deeply embedded position in global payments.
The sideways action didn’t mean the business stopped working. It meant expectations had collapsed. That’s often where long-term opportunity begins.
$SOFI has gone through similar phases.
Periods where price stalled while the company continued to add members, expand products, improve margins, and move closer to sustained profitability. Those stretches didn’t feel good in the moment — but they allowed long-term investors to build positions at prices that won’t look obvious in hindsight.
$CAKE is another example.
Not a growth darling. Not exciting. But steady cash flow, brand strength, and shareholder returns quietly did their job while the stock moved sideways. This is the type of holding that doesn’t need constant price appreciation to justify its place in a portfolio.
Even $AMZN has spent time moving sideways in the past.
During those periods, AWS kept growing, advertising scaled, and margins quietly improved. The business widened its moat while the stock tested investor patience.
Sideways didn’t mean stagnant.
It meant undervalued progress.
Why Sideways Stocks Often Outperform Later
Outperformance usually doesn’t start when everyone is watching.
It starts when:
• Valuation compresses
• Expectations reset
• Execution continues
By the time the stock starts moving again, much of the opportunity is already gone. The easy compounding happens before the crowd shows up, not after.
Sideways stocks also give investors something incredibly valuable: time to accumulate without chasing. You can build a position thoughtfully. You can size correctly. You can let the thesis play out without emotion driving decisions.
That’s a gift most people don’t recognize until it’s gone.
The Mental Shift That Changes Results
The biggest mistake investors make is confusing inactivity with risk.
Price volatility feels risky, but stagnation feels wrong. In reality, sideways action often reduces risk by allowing fundamentals to improve without price running ahead of reality.
If nothing has changed about the business — and in many cases, things have improved — then sideways price action isn’t a warning sign. It’s an invitation.
The market rarely hands out easy money in obvious ways.
More often, it rewards those willing to sit through boredom.
Disclosure
This newsletter is for informational and educational purposes only and does not constitute financial advice. All investing involves risk, including the potential loss of capital. Always do your own research and consider your financial situation before making investment decisions.
Surmount
I share my full portfolio framework, conviction levels, and long-term strategy on Surmount — including how I identify undervalued businesses, size positions, and decide when to add during sideways periods.
If you want deeper insight into how I think about long-term compounding and risk management, you’ll find it there.
