bcrafty - re: stating exit strategies
>>But on the issue of exits by people who are giving a particular recommendation, I was instead thinking more about stop-loss exits. I meant that I felt the writer should mention some kind of hard and fast "point of no return" type exit, such as "this pick is out the window if it falls below the support level of 26 from March" or "this pick is based on its current uptrend, so if it falls much below the weekly trendline from the October advance, I'd sell." Exits like this help to let the reader have a clearer idea of where the writer's coming from, and help to complete the picture of the particular trade.
Even if the person making the recommendation is basing his pick on FA, he should have some kind of exit in mind. This type of picker usually looks for some kind of significant change in the company or the way it operates, such as a large decline in the sales of their superwidgets or whatever. But IMO those pickers should state some kind of standing rule on exits such as a percentage stop loss, even if it's a wide one like 25%. <<
I totally agree.
Why do we let these pickers off the hook?
It would seem that the fundamental criteria used to
recommend a buy could also be used to signal an exit.
A check list of exit fundamentals should accompany each buy
recommendation, such as -
Overvalue point
Slowing of sales growth
Slowing of earnings growth
Decreasing Pre-tax profit margins
Deteriorating inventory, receivables
Increased debt
Deteriorating financial rating
Declining return on equity
As well as other warning signs -
Reduced or eliminated dividends
Insider selling
Accounting problems
Adverse management change
Negative news
etc.
I think it would be great if you wrote a sweet little
e-mail template that we could all use to send to
these gurus every time they recommend a stock
but fail to state an exit strategy.
Maybe that would get their attention.
Really glad to hear that your biz is doing well! |
