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Strategies & Market Trends : Fundamental Value Investing

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To: Sergio H who wrote (2378)	10/3/2012 10:21:24 AM
From: E_K_S	Read Replies (1) of 4719

Re: Selling strategy If you study Buffet's strategy for selling, it looks like he pretty much holds long term (ie forever). He may be forced to sell small chunks in one or more of his larger holdings when/if a better buying opportunity present's itself. I was surprised to see that when he bought his railroad, he did not close out any one position but rather sold some JnJ, COP and others to raise the necessary capital. Perhaps it is worth studying his previous "sell" strategies to arrive at something we might use in the SI challenge. I will have to study this awhile and try to see what Buffet has done in the past. Specifically, it would help to know what positions he closed out and why. I think INTC was a recent issue that he closed out but not sure. A list of some of these trades might help us determine our own strategy. For example, if INTC was closed out, it was not because of the 10 year Bond spread being so low as INTC pays an attractive dividend (close to the 10 year rate). It must be something he see's in their future manufacturing/technologies for the company/sector. Maybe he just concluded that he just did not want to own a technology company. INTC has a lot of value and is the leader in the sector for it's manufacturing efficiencies. Therefore, it appears his selling strategy is quite involved and does not follow a "set" stop loss rule. FWIW, I never use a set stop loss rule but I also do not allow any one position to be over 8% of the portfolio. So, if my loss on any one stock exceeds the levels mentioned up-thread, for me is not an issue (as the % to the portfolio remains quite small). My sell decision is more on the future prospects of the company and if my original premise for the investment has changed. My selling strategy is (1) peel off shares of position if it exceeds a certain % of the portfolio usually 10% and/or (2) close out position if my original investment premise has changed and/or if there is another similar opportunity w/ "significantly" better return characteristics (ROA/ROE etc). EKS

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