yudeng2004 Posted April 12, 2012 Posted April 12, 2012 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?
CONeal Posted April 12, 2012 Posted April 12, 2012 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.
biaggio Posted April 12, 2012 Posted April 12, 2012 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
biaggio Posted April 12, 2012 Posted April 12, 2012 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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