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Author: patrick2020 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3433  
Subject: a question about selling Date: 10/20/2003 10:23 AM
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first, my investment style involves themes so i want to hold for at least the intermediate term (3-9 months) and preferably long term. I also hold a couple russian stocks in addition to some mentioned here. I sold CSCO some time back for a gain because my basis was less than $4.00...I have seen several people mentioning selling part of a position but am curious as to their reasoning. And why now. What is the better investment or bad news. Quite frankly, i do not know when to sell. The china connection stocks are in a great uptrend with considerable volitility without corresponding news. If you sell, you end up buying back in at near the same price. I follow momentum and price indicators, chart patterns, PnF charts, candlesticks and keep a watch on the news for sales and earnings information. (This is a learning experience and i have no life). I find the IBD rules suggestions on selling as a good way to insure only average returns for a higher risk investment. If you sell because the market turns, most stocks do go down but not all and not all equally. And are you fast enough to get back in to these. Also, china stocks are not as tied to us markets. Selling after a 20% price increase in not wise with the returns these investments are posting. At20%, you are out of the market part of the time and you will have some 8% losers so you over-all return may look like an decent mutual fund but with a lot more work. i understand his exception of fast growers and cups and saucers and saucers with handles but do not believe any of the above works with these particular stocks- although i also do not believe that the laws of supple and demand have been suspended.....So, as the months and years go by, if anyone has any ideas on selling, it would be appreciated (i dont really believe very much in portfolio rebalancing - it reminds me of modern portfolio theory--- i prefer Davy Crocket---Make sure you are right and then go ahead) my laugh for the day....in the meantime i am holding on--take care and i apologize for rambling
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Author: eid Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 850 of 3433
Subject: Re: a question about selling Date: 10/20/2003 9:18 PM
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There was an article written by Bill Mann with Fool on the Hill which outlined what I thought were excellent ideas on when to sell. They were based upon the ideas of Phillip Fisher in the book "Common Stock and Uncommon Profits." The article gave 3 reasons for selling:

1 When the reason for the original purchase is floored.

This is when you have made a mistake.

2 When a company no longer qualifies as a top performer

3 When you have a better place to put your money.


I consider reasons 2 and 3 compete and this is where you need to be able to assess the values of competing companies in terms of their potential growth and intrinsic values. Over time these change with recorded results and therefore it is important to update your knowledge of comapnies at least quarterly to see exactly where you ar going. Of course one should set loss limits and where share prices drop ensure you are getting some reward from the market by selling while you are still ahead in a falling market.

You may be able to pick up the full article in the Fools on the Hill archive in fool.com.

EID

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Author: Larry01Gott Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 861 of 3433
Subject: Re: a question about selling Date: 10/21/2003 12:48 AM
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When to sell? "Ah yes", said Shakespeare, "there's the rub!" [not that BUYING is easy...]

First, a response to (1) EID's list from (2) Bill Mann's interpretation of (3) Phillip Fisher's ideas... (well, enough of that)

The three reasons listed for selling are:
1. When the reason for the original purchase is flawed,
2. When a company no longer qualifies as a top performer, and
3. When you have a better place to put your money.

In my post #200, which was titled "How I select my stocks", who remembers my first sentence? You get a 100 if you remember.
Here it is: It was in bold there, so it's in bold here:
The question one should always ask regularly is this, “Is my hard-earned money in the very best possible place that it can be?”

So, yes, working from the bottom up, #3 is an important consideration.
The way it worked for me, is when within the last month I "ran the numbers (and non-numbers)" on LEXR-Lexar Media and SNDK-SanDisk, they came out so high in the "Gott ratings" that I had to buy them. And something else had to go to make room.

What about #2 above?
In my post #218, which was an addendum to "How I select my stocks",
I said, (not in bold):
"But if you don't have a rating/ranking system, a good guideline is when earnings start declining.
Get out of that stock, and stay out of that stock! Until it again fulfills the criteria for purchase.
Forgetting and ignoring this rule is what cost me a lot of money in the fall of the Nasdaq. I haven't made that mistake since -- and don't you hold on, hoping for better times. Instead, find a better STOCK. [THIS may prove to be the most important thing I have said in these two posts.]"


So, yes, #2 is an important consideration.

And about #1 above?
I didn't speak to that issue, but it amounts to this: "Admit your mistake, and take your medicine." (Which is usually a big loss).
Did you put all your money into Radio Shack brand computers in 1980?
In IBM's OS/2 operating system for PC's in 1987? In groceries on the internet in 1998? In high-definition TVs in 2000? (you can complete the list.)

OR... did you buy a stock hoping for future earnings where no earnings existed? Ok to do that in ONE of your fifteen stocks. But not in 13 of your 15.

There is ALWAYS a better place to put your money than a declining also-ran. It's the biggest lesson I learned in the crash of the Nasdaq.

But apart from my rating system, here is the sell sign I use most: a disappointing quarter, with potential future disappointments in the future. I don't need to be in such a stock and neither do you! That is what happened to Hi-Tech Pharmacals two quarters ago.

There are too many other stocks that are having great quarters, with likely more great quarters to follow.

Second, these thoughts about what patrick2020 said in the post that started this thread:

1) patrick, I too am a mid-term to long-term holder. You mention that in your first sentence.
2) Yes, I have had to buy stocks back at the same OR HIGHER price, when I really did not want to be out of them.
3) I'm not much into the techincal side, mostly because I buy stocks "looking through the front window", with only occasional glances "in the rear view mirror" to see what the stock price has done previously.
4) I'm also not much into Stop-loss orders. Too many times they sell me out of a stock that I do not want to be out of. CANSLIM's 8% figure is semi-bad advice. Use that 8%, but then adjust it for the BETA of a stock. If the beta is 1.00, use 8% as your Stop loss figure. If the beta is 2.5, use 20%. That way you won't get "stopped-out" by a temporary drop.
5) It's not a bad idea to sell off little-by-little as you have good success in a stock. After a 70% increase in Nam Tai (NTE), I sold 20% of my holdings, and it STILL was my largest holding after my sale.
6) About portfolio balancing -- there is a nugget of truth there. My portfolio was getting overbalanced in the China Five. Up from 50% to 68%. I brought it back down to 50% about 20 days ago.

Finally, about the two above-mentioned posts #200 and #218 about how I select my stocks. If you reread them, make sure you read #218, which is every bit as important as #200.

Comments? Questions? Issues?

Good night, see you tomorrow.
Larry


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