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What factors make you decide to sell and increase cash % in your porfolio?


yudeng2004
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We all decide at some point to sell portions or all of a particular position in our portfolios, I am curious what thought process you all go through when deciding to do this? Is it purely a fundamental decision for you, or do you look at market factors/events, trends, or a balance of these factors?

 

Here are some scenarios that I have experienced and I'll explain my thought process at the time, and I hope to get your answers as well:

1) [The stock I hold is near 90% intrinsic value, and I have not found other alternatives:

case a): market is undervalued or fairvalued: I hold the position and do not increase cash.

case b): market is overvalued: I should sell but I still hold most of the time, since the stock has not exceeded fair value (this always bites me).

 

2) The stock I hold is overvalued:

I always sell regardless of market conditions/other factors.

 

3) The stock I hold is undervalued, but there is a huge looming macro problem such as Europe mess:

I sell a portion and buy some hedges.

 

4) The stock I hold has had a huge run, but it is still undervalued:I don't sell since it is still undervalued even though pull-back is 90% likely (I look back and it seems after huge run-ups it nearly always good to sell, this always bitse me too)

 

5) The stock I hold is at 70% intrinsic value, I find another stock at 40% intrinsic value.

Even tho I should sell here and switch even after tax considerations, I find myself lazy sometimes and do not do this nearly as often as I should.

 

Any other scenerios you think of would be welcome in this thread.

 

I am asking this question because between macro events, fundamental analysis, and also trends(run-ups), I find myself trying to juggle these factors and I wonder if any of you do this or not, and what is the thought process you use when you make a sell decision under various scenarios?

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How about situation where you have held for long period of time say 3 years, stock has not moved a whole lot and:

 

i. fundamentals have improved, and still selling at a significant discount to IV...my thinking is to keep holding +/- add to position

 

ii fundamentals have not changed, stock has appreciated modestly (less than  what I originally hoped) but only selling at a 25% discount....I have several of these..I am thinking that this should be traded for a better or equal business selling at a bigger discount if it is available i.e trade 70 cent dollar for 50 cent dollar

 

iii fundamentals have deteriorated but selling at a discount to your reassessed IV...I am thinking this should be sold i.e I made a mistake

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1) Realizing I screwed up

2) Admitting to myself I screwed up and that something needs to be done.

3) Taking action to fix the screw up

 

Some of my biggest mistakes have been from thinking it will get better.

 

I like your post.

 

I am trying to work on #2 though I worry that selling will be a mistake. Its funny though because I don t expect anyone to be perfect, especially myself. It s not always obvious that you re right or wrong- I think these situations should be avoided (i.e in the too hard pile)-should they be sold once you realize they are in the too hard pile? Should it be held for better price + then sold?

 

Have experienced being whipsawed in both directions.

 

I find that time (allowing for fundamentals of underlying business to show themselves) makes realizing that you have screwed up more obvious

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