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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (54708)	1/4/2015 1:56:50 AM
From: Jurgis Bekepuris	Respond to of 78627

To answer your question: people make fun about analyst "hold" recommendations, but there is such thing in real life. :) There are actually three somewhat overlapping areas of stock price: undervalued, fairly valued, and overvalued. "Fairly valued" is not a point on a line. It is a (possibly large) interval. In your example, $0-$30 is undervalued, $31-$45 is fairly valued (I just made up $45 for example's sake) and $45-$10000 is overvalued. :) You don't want to buy stock that is fairly valued and you don't want to sell it there, but you want to hold it if you have it. So here's where the "hold" recommendation fits. :) If you look at Buffett, even though he says he's "sell never" investor, he does sell some things. But his "fairly valued" interval is very big, so he usually does not sell at all. I've always found the decision of where to sell a lot harder than where to buy. My sell strategy, to the extent that I have one, is don't sell losers. It leaves me with a catch-22. I tend to not sell the losers. And the winners, well they usually have improving stories and are doing well, so I don't want to sell them either! Somewhat agreed. There are some pointers for selling though: - If significantly better opportunity comes along. This requires comparative evaluation of two opportunities that may be hard. (Very hard for me usually) - If business deteriorates materially and it's not clear if it will ever recover. (Unless the stock dropped 90%+ already - sell, if it dropped 95% - think hard and maybe still sell). - If stock runs up way above fairly valued. (But it could run up even more... see MA, V, GOOGL, AAPL, etc... but it could crash back too, see LVLT in 2000 :)). Some people make the following suggestions: - Sell your dogs. "Don't watter your weeds". IMHO stupid if the company crashed temporarily - like you said, you could buy more and make tons of money. You need to sell the stock if company is not doing well and might not do well in foreseeable future though. - Take some money off the table, i.e. sell some of the winner. Might be stupid too if you have BRK, MSFT, AAPL or whatever long-term winner company. I did some of this though, since most of the time the company is not BRK/MSFT/AAPL. - Look at the stock as if you were buying it. If you would not buy it here, sell it - again about selling winners. This is stupid, since it ignores the fact that there is a large "fairly valued" interval. Perhaps better way to think about it is: what was your goal/expectation/plan? If the expectation was to hold stock forever, then perhaps you should hold it forever whether it falls or rises. If the expectation was that a stock was net-net cigar butt and it should recover to 1.2x book, then sell at 1.2x book even if it seems that it might run to 2x book. If the expectation was to sell the stock when oil recovers to $97, then sell when oil goes to $97 even if you think that it might go to $192. Or at least reevaluate hard. :) It is possible to have similar plans for drops: if oil drops to $30, I will add 2x, but not more. If oil drops to $10, I will not add more. I think this might be worth doing beforehand, though few people do it and even fewer follow their plans... :)

To: Elroy who wrote (54708)	1/4/2015 9:43:50 PM
From: Paul Senior	1 Recommendation Recommended By Jurgis Bekepuris Respond to of 78627

I'm with Jurgis here. It's not always a step function buy for me, i.e. it's not Don't buy at 31, do buy at 30. It's often murky for me. Sometimes I'll get impatient and buy when the stock approaches my buy price or when it drops in my value box, but when I still have the distinct impression the drop isn't over. When I look at a stock I own, I don't automatically say it's either a buy or it's a sell-- decide which. There is a holding period (for me, in my view) which I am ususally willing to accept. I don't claim to be consistent in my approach-- I can be emotional also. Since I often buy down, the stock I buy at $30 (where I believe it's a value stock and where I wouldn't/didn't buy it at $31, could drop to $25, $20 for example. Somewhere in there, I'd be looking and reconsidering. If I believed it was still a good value I would be adding more. Maybe several additional buys as the stock drops. Say the stock at some point begins to recover. Here's what I might do: If the stock reaches $30 again, I might be a seller of at least some shares (even though at $30 it's a value buy in my view). It is something (emotional) about grabbing hold of some profits, perhaps maybe reducing a large position that I didn't expect to accumulate. Maybe just relief that the stock has recovered. (YARIY is example whre Ive done this.) Just how I look at it. Not saying it's correct or for anybody else.