Weak Sister

What Is a Weak Sister?

"Weak sister" is a slang term for an element that undermines an entire system. The term can either refer to a single individual or a specialized group that is considered to be the weak and undependable link in an integrated process.

Understanding Weak Sisters

Weak sisters are what hold someone or something back. It could be a malfunctioning part of a team-oriented task, such as the slowest member of an assembly line or a sluggish marketing team. Alternatively, it may describe a security, economy, or business unit that performs worse than others.

Weak sister is similar to the term the “weakest link in the chain.” Both refer to someone or something that risks single-handedly bringing about the failure of the system or the group it belongs to. “Weakest link” came from the proverb “a chain is only as strong as its weakest link.” In other words, one substandard link may cause a chain to break, even though the other, stronger links may hold when put under pressure.

This saying can be traced to the work of Thomas Reid. In Essays on the Intellectual Powers of Man, published in the mid-1780s, Reid Wrote: “In every chain of reasoning, the evidence of the last conclusion can be no greater than that of the weakest link of the chain, whatever may be the strength of the rest.”

Example of a Weak Sister

Weak sisters can appear in every industry. For instance, in an investment portfolio, there is usually at least one laggard that weighs on total returns.

For example, suppose there is an investor, Mark, who has invested in five different stocks: Company A, Company B, Company C, Company D, and Company E. Over the past three years, four of the five stocks have done admirably, comfortably beating the rest of the stock market with returns between 17% and 40%.

Unfortunately, that impressive performance has been undermined somewhat by the weak sister. Company C returned just 2% because a large chunk of the business (its energy arm) experienced tepid demand for its products and services as a result of a fall in the price of oil. Tricky trading conditions in that division ended up weighing on the average return of the whole portfolio, bringing it in line with the market average (or below if you factor in fees).

Weak sisters can also refer to entire countries. Following the great recession, Europe struggled to pay off all the debts it had accumulated, in what became known as the Eurozone debt crisis.

Five of the region’s countries — Greece, Ireland, Italy, Portugal, and Spain — took the majority of the blame. These nations were accused of lacking fiscal prudence, not generating enough economic growth, and being at risk of defaulting on their bonds.

Special Considerations

Just because something or someone is referred to as a weak sister does not mean it is beyond saving. Weak sisters might not always be undependable. In many cases, what struggled and held everything back one year might bounce back in the next one.

For instance, once the oil price rebounds, Company C might likely go from the weak sister to the biggest outperformer in Mark’s portfolio. Jittery investors pushed the valuation down to reflect the challenges facing the sector. That means the stock will look incredibly cheap if sentiment improves and trading picks up again.

Market cycles and business trading conditions shift over time, leading various asset classes to fall in and out of favor. For many investors, there’s lots of money to be made from identifying weak sisters and determining, before the rest of the market, when they have bottomed out.

Weak sisters can also become stronger with a few important tweaks made from the inside. Certain capital expenditure (CAPEX) or cost-cutting strategies can transform a bloated, misfiring laggard into a much leaner and meaner proposition.