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When To Sell Stocks To Make Money?

2011/4/3 14:45:00 158

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Rational investor

When the following situations arise, consider selling stocks.

First, the stock price is seriously overestimated, far exceeding its actual value, similar to the 2007 market; two, serious problems in the operation of the company.

For example, debt levels, inventories and accounts receivable continue to rise. This is the 3 common warning signal to judge the company's efficiency deteriorating.

In addition, the low return on shareholder equity, the decline in profit margins, the contraction of market share, or the unwise acquisition of companies and unexpected changes in management mean that the company has changed qualitatively, and the three is the wrong buying of stocks.

It is normal to make mistakes in the stock market, even if such outstanding investors as Warren Buffett and Peter Lynch have made investment mistakes.

Because after buying a stock, it may encounter unexpected situations, such as problematic related pactions, altered accounting methods and declining competitive advantages.

There is also a chance to find better or more certainty.

Peter Lynch often used this as an important basis for his selling: "90%, I sold.

It is because I have found stocks that have better prospects, especially when the original development scenario that I held in my hands seems unlikely.

John Templeton, the world's top ten fund managers in twentieth Century, has the reputation of "the father of global investment". He spent years thinking about when to sell. Finally, he found the same answer: "when you find a better vote that can replace it".

He believes that this comparison is very fruitful, because compared with the isolated view of stocks and companies, it makes it easier for us to decide when to sell stocks.

If the price of a stock is approaching our estimated value, then the best time to search for alternatives is.

In the regular search process, we may find that the price of a stock is much lower than that of our company, so we can choose it to replace our current stock.

This method is very unique, and no one knows that dumpton is a band operation.

So Deng pun pointed out that this should follow certain principles and should not be a pretext for changing the investment portfolio without any necessity.

Of course, in the process of continuous search, if the undervalued stock can be less and less, it can indicate that the stock market has reached the peak value, then it is time to evacuate.

Dumpton suggested that only when we have found a stock that is 50% better than the original stock can we replace the original stock.

In other words, if we are holding a stock, the stock has been doing well. Its trading price is now $100, and we think its value is $100. Then we need to buy a new stock that is undervalued by 50%.

For example, we may have found a stock with a paction price of US $25, but we think its value is US $37.5. In this case, we should replace the original stock with a trading price of US $100 with a new stock of 25 US dollars in trading price.

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Templeton

The practice comes from his investment thoughts.

His main goal is to buy things at a price far below their true value.

Two points should be noted: if it means that the growth potential of buying is limited, it does not matter; if it means that the next 10 years will grow at two digits, that will be even better.

The key lies in the development of the company.

If we can find the ideal low price stocks in developing companies, they will continue to bring us substantial returns over the past few years.

Therefore, attention should be paid to the extreme dislocation between stock price and value, rather than entangled in some trivial details.

The significance of the successful application of this principle is that constantly searching for cheaper stocks that are better than our current stocks can not only teach us the necessary methods, but also give us the necessary psychological qualities to prevent ourselves from getting overexcited and intoxicated, because this excitement and intoxication will make the price of our stocks higher.

In order to maintain strength in competitions, we must focus our attention on the next opportunity.

Paying more attention to the future is more important than paying attention to the past.

Low price stocks are often unpopular stocks, but in fact, the unpopular ones are not necessarily from the company level or the industry level, but from people's wrong ideas.

Therefore, the best opportunity is often hidden in a bland view.