When to Sell Stocks

When to Sell Stocks

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A useful guide for when to sell stocks is to
look at the flip side of when to buy stocks.


In establishing the concept of value
investing Graham Green taught that the
investor should analyze a company and
come to an opinion as to its real value.


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This was the beginning of fundamental
analysis instead of pure speculation for
many stock market investors.


The opposite side of buying stocks, because
their real value is far above their stock
price, is selling stock when its real value
has dropped.


In this case there is no longer a margin of
safety between the real value or intrinsic
value of the stock and the stock price.


There are several ways to look at a stock to
see if its intrinsic value warrants holding it
or selling.


The ideal situation for many is that stock
investment is always a matter of long term
investing.


Thus fundamental analysis outweighs
technical analysis, the investor only pays a
commission when buying, and the
company prospers forever.


Because this is mostly not the case we are
taking a look at when to sell stocks.


There are stocks that you want to own and
stocks that you do not want in your stock
portfolio.


If you are looking for stocks with high real
value or intrinsic value you can start by
looking for securities whose shares
appear underpriced by analysis of
company fundamentals.


Stocks that are trading at a discount to book
value, have a high dividend yield, have a
low price to earnings ratio or a low price to
book ratio.


The concept of intrinsic value looks at the
discounted value of all future distributions.


Because there is investment risk in all
decisions many successful value investors
look for very good companies that are
underpriced and not penny stocks with
promise.


The idea is to adhere to a margin of safety.


The basis of knowing when to buy and when
to sell is that the investor needs clear and
accurate information.


Lack of clear information is, for many, when
to sell stocks.


For the strictly long term buy and hold
investor when to sell stocks is when the
margin of safety between a stock’s
intrinsic value and its market price no
longer exists.


Entire market sectors can be come bad
investments at the current price with a
recession, changes in technology, and
stock market crashes.


In a bricks and mortar, heavy industry,
trucking company, oil company world this
decision can be anticipated.


The decision comes much quicker in a world
of computer software, genetic engineering
companies whose value resides in the
skills of their employees, and non
competitive companies whose value
skyrockets when a takeover bid surfaces.


This is where Candlestick basics enter the
picture.


It is during these times at the use of
technical analysis tools such as
Candlestick chart analysis is important as
it will allow an investor to anticipate market
sentiment and know when to sell stocks
before the company’s stock price
plummets.


Because much of the support for long term
value investing comes from data during
period of largely sustained economic
growth in the USA it is wise to consider
how to approach investing in a somewhat
flatter market promised by the 21st
century.


In a world where stock values may fluctuate
a lot but not rise, or fall, over the very long
term, trend trading or looking for market
reversal with the use of Candlestick
pattern formations for trading rather than
long term investing may be preferable.


Nevertheless, even in the short term, it is
wise to remain aware of what gives stocks
value in order to know when to sell stocks.


When to Sell Stocks

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