When To Sell

[robertbanking]

Hello everyone, hope you are doing well and enjoying your week. Lots of rain here.

I have had a good run with an investment Seagate Technology which manufactures hard drives i have held this for 18 months. I have a rule that i sell investments that are down 30% from the cost price. However does anyone kindly know when the best point to sell 100% of an investment that is doing well please? Would this be when financials or growth becomes less impressive please? I know for instance Warren Buffett has held Coca Cola stock for years but i suppose everyone's formula is different. If anyone had any thoughts on this i would be very grateful please, thank you for your kindness.

Thanks for all your support, it means alot. I believe this is the best forum around because of the very respectful and intelligent people in this community. Take care.

 

[Financial-Modeller]

Whether its time to sell is specific to your circumstances, not what I or anybody else says, but the decision is likely to be driven by three levers: necessity, tax, and relative valuation.

1. necessity. In the unlikely event that this is your only investment and you need money to avoid starvation, you obviously sell some irrespective of current price.
2. valuation. If you want to sell and reinvest proceeds into another investment, you need to assess whether the alternative will outperform this one. Change in price of the this specific stock is irrelevant to this. Valuation is too huge a subject for this discussion.
3. tax. Don't let the tax tail wag the investment dog, but if CGT or IHT are considerations, take advice on timing any sale to minimise tax

 

[Mark T Jones]

+ 1 for @Financial-Modeller response

I'd add

The time NOT to sell is the top of the market - recipe for disaster!

In this specific instance, in the midst of a global chip shortage might well be a good time to sell.

 

[MBE2017]

Depending on your level of risk, you could sell it in parcels, ie 25%, 50%, 25% etc., or in one hit.

No one can tell you the right time, but you can decide when to sell. Generally speaking most tech type stocks have suffered recent losses higher than other types of stocks on fears of the expected recession.

Long term it will probably still increase in value, but over the next one to three years it’s anybodys guess as to what might happen. Your shares have lost approx 11% over their years high, personally I am expecting to see most tech stocks lose at least as much again if not more, but it’s all guesswork on my part.

 

[WaveJumper]

How long is a piece of string ...... interesting article from earlier in the year my one bit of advice would be if you are bailing out its worth just making sure you are not doing this just before the qualifying period to get your next dividend payment nothing worse than slipping up on that. And as an aside hope your investing within an ISA to avoid the tax and capital gains. DYOR

Read This Before Buying Seagate Technology Stock

We think that Edwards Lifesciences currently is a better pick compared to Seagate Technology. Both companies have similar net income of around $1.5 billion, but Seagate’s current P/S multiple stands at 2x, while EW’s stands at almost 15x. Do these valuations make sense? We think so, and...

www.forbes.com

 

[The Byre]

I am out of the mainstream stock markets and have been for some time and I have been concentrating on high-risk speculation companies run by people who know what they are doing and in markets that go up when bad things happen.

General valuations are out to the stratosphere and I see a major risk of a major correction - though it may come after a crazy melt-up when the markets see that the Fed cannot really increase interest rates without bankrupting the US government. In that case, a melt-up could be followed by a catastrophic melt-down. Either way, this year is going to be one of 'those' years where fortunes are made and lost - mostly lost in my guestimation! My best guess - stagflation.

STX - good things -
Slightly below fair value.
Forcast to grow slightly but nothing to shout about at 5%.
High debt is well covered by cash flow and gross earnings.

STX - bad things -
Debt to equity has exploded from 200% to well over 1000% in your 18 months of holding.
Uncertain future.
Insider selling.
Dodgy assets ($1.4bn receivables, $1.3bn inventory, $1.8 accounts payable)

Given $6bn debts and $1.2bn other liabilities, plus the high amounts it expects to receive from customers and the high stock levels, if the market does degenerate into turmoil (big IF there) there is a strong chance that this rather boring picks-n-shovels big-tech may not survive intact.

 

[WaveJumper]

And a quick check here tells me you probably had your divi payment in January

 

[Alan]

The time NOT to sell is the top of the market - recipe for disaster!

Can you explain my simple mind thinks if you buy at the bottom and sell at the top you maximise profit.

 

[The Byre]

You never know when the top is reached. In fact, timing the market is today a largely lost art, as we have had decades of prices only going one way in the long run. Buying and holding was always the way to go. In the future that will no longer be possible.

In future, you are going to have to study the company properly, understand the market they are in and understand what the future holds for that market. The old adage that the tide raises all boats will no longer apply! Some types of stock will go one way and others will go another way.

In the coming months, commodities, energy and financial metals will probably rise and growth stocks will fall. If there is a major correction, margin calls will bring the lot down, but value stocks will prove to be long-term winners - companies with little or no debt, strong market positions and strong USPs. I have my beady eye on a few and can hardly wait for a decent crash to bring them into well below fair value territory!

I do worry about retail traders who buy on a hunch - a mistake I used to make a few decades ago - and buy and sell without any analysis software or in-depth knowledge of the companies they are buying and selling. They see something on YouTube or CNBC and jump in with both feet without knowing basic stuff like who else owns the company, what the latest trades are or in the insiders are selling out or what the latest sales and inventory figures are!

 

[Mark T Jones]

Can you explain my simple mind thinks if you buy at the bottom and sell at the top you maximise profit.

In a nutshell, the top only happens when it falls - sometimes precipitously

 

[MBE2017]

Can you explain my simple mind thinks if you buy at the bottom and sell at the top you maximise profit.

People who try to do the above, tend to miss time things. In hindsight, it is the perfect way to do things, in reality, it tends to be better to buy after a stock definitely appears to be rising, and sell once it definitely seems to be falling.

Although you might miss some profit, or pay a little more, it tends to be a safer long term option. All down to your own personal trading strategy.

 

[Alan]

In a nutshell, the top only happens when it falls

Ah you don't mean the top then you mean after the top. Of course you'd have to be dead lucky to get the absolute top, you are likely to be too early or too late. So what you are advising is that statistically is you are better to sell as the curve flattens at the top as the the rate of change is less than after.

Like this?

 

[WaveJumper]

Of course it could be a double top pulling back to its level of resistance before continuing its up trend.
Unless you can read the charts you will only be second guessing.

If you’re an investor you need to set your goals, are you in long term 1, 4, 10 years or are you in for a quick profit, you’ve been in 18 months maybe trebled your investment ……… now you have to way up the risk, is it time to jump horse and find the next good runner. All depends on your risk appetite.

 

[MBE2017]

Of course, you might be only investing for a few seconds, or years at a time or anywhere in between.

The days of holding shares for many years has passed for many types of investors, whilst some still prefer that strategy, the likes of Warren Buffet of Berkshire Hathaway come to mind.

 

[The Byre]

There is alo the real risk in a bear market of a double bottom, as the market heads South for the Winter. You buy at the false bottom, thinking you are buying low, the price rises and then falls far deeper than before.

In this age of ordinary punters buying shares on Reddit rumours instead of careful analysis and long-term strategy, emotion and even hysteria can take over and thousands rush from one side of the ship to the other until a company capsises.

 

[WaveJumper]

There is alo the real risk in a bear market of a double bottom, as the market heads South for the Winter. You buy at the false bottom, thinking you are buying low, the price rises and then falls far deeper than before.

In this age of ordinary punters buying shares on Reddit rumours instead of careful analysis and long-term strategy, emotion and even hysteria can take over and thousands rush from one side of the ship to the other until a company capsises.

Yep and the MM's always seem to come out on top, which I think a lot of our Reddit & Robin hood traders may have learnt this year to their cost.

Meant to add catching a falling market is said to be like catching a falling knife