RocketMan, try not to look too much at valuations. That's a losing game for as number of reasons, but the most important one is this: you invest in a company in the hopes that the company will earn lots of money in the future, and you can look back some day and say "I bought XYZ at $1 a share split adjusted, and now it's trading at $30". Your friends will flock around you as if you are a market genius. In fact, all you did was to take advantage of the growth of the company (which was why you invested in it the first place).
I tend to exit only when I perceive that there is a fundamental long-term negative shift in the company. For example, CKR is a very rapidly growing restaurant chain. Last spring (as I recall) they bought out a troubled franchise, and financed the deal with convertible preferred debt. I examined the debt issue closely, didn't like what I saw (because of the dilution and high interest rate), and bailed out. The stock subsequently dropped from about $44 (where I sold) to $19. They recently announced repurchase of the debt (which was the fundamental I didn't like originally). So, in spite of poor results this quarter (which is the result of horrible weather in the Midwest) I have become quite bullish on the company. The point is that the sell and buy decisions were made on company fundamentals, not on price of the stock.
That said, however, I am becoming concerned that many of the stocks in my portfolio have gone up too high too quickly. My response has been to sell covered calls.
TTFN,
CTC |
