The Saturday Evening Post has a great article called When to Sell a Stock. They incorporate the views of Buffett and Phillip Fisher, and the idea they put forth is this: if you understood the story of the company and did your due diligence before buying the stock, the only reason to sell it would be if the story changes. So the question you must then ask yourself is: has the story changed?
The “story” in this case is the state of the business – and how it is competing in its relevant market sectors. Are they selling widgets like its 1999? That’s probably a good sign.
If they are getting investigated by the SEC, on the other hand – that’s not so good.
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January 25th, 2006 at 8:02 pm
Figuring out when to sell a stock is more difficult than finding a good company to buy.
January 30th, 2006 at 9:57 am
I guess you need to read my recent post tearing apart Phil Fisher’s book. Holding stocks forever is a bad idea for a small investor. Maybe Buffett has to do it because he has to invest billions of dollars and he can’t just move in and out of positions that we we can.
February 2nd, 2006 at 10:18 am
I think Glassman’s advice works for value investors who are into long-term investments. Although I prefer this myself, his advice won’t work for those investors who want to speculate rather than invest. Most often they rely on technical analysis, but relying on technical analysis often means using market psychology to judge a stock’s value and future development potential. In general you can say that his advice works for them, too, but the “story” for them is the market instead of the company’s value.