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Originally Posted by silvermonte
I would like to ask some theoretical questions. Lets say a year or even 2 years from now a stock has has no growth and the dividend payout has not increased at has been a low value. My money could be put to better used in a best of breed. Now assuming the company is not doing anything wonky behind closed doors, what would be a reasonable time frame for a person to wait on a stock to start doing something again?
I can use my CASY stock as an example. I bought in 2 years ago and it has had great growth and I'm well in the green on it. So if for some reason it was to just go stagnant and nothing would change for a year, how long should I wait if there is no news coming in from their side on what is going on.
That's not what is going on with this but I was just using it as an example. I could see myself saying well I've made X and if I wait a bit longer I might make more. That would be the emotional side taking over with investing. What clues should a person look for to know its time to move to greener pastures?
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Good / fair question. Selling is probably the hardest part to figure out - particularly when the name is a winner. That in itself brings up LOTS of quandaries. Why would you want to sell when it's done exactly what you wanted it to do? Has there been a FUNDAMENTAL change in the business which now changes the reason you invested in it originally? Are sales flattening or headed down? Are margins shrinking? Has another player come in to the market and taken market share? Has the position grown to be too much of your overall portfolio?
Now - here's a harder unknown question I always ask myself. If I sell - I now have cash to invest. What makes me think I can do "better" or even as well as what I'm in and just sold? Usually I don't trim or sell unless the name is a loser -- or I have my eyes on something that I need/want in the portfolio. Or the position has done so well that I just need to trim a little off the top.
Your question is actually unanswerable with a "pat" do this style answer. The reason for this is because you can't just take a particular name and what's it's doing in a vacuum. What has it been doing relative to the market? Is the whole market flat or down... or is the whole market UP and the name you're looking at down or flat. Thus not keeping pace with the overall market.
The other thing is to pull it up on Google Finance -- and then scroll down to where the page shows other names which Google adds as "comparable" businesses. Where is it compared to those?
By the way -- I never worry about stocks that have done what I thought (hoped) they'd do. The ones I worry about are the ones that don't. That's when I start looking at why -- and why did I choose the wrong one. Right now - we have a FUNDAMENTAL change in Oil... all my oil related stuff is getting killed. I KNOW why that is - there is nothing I can do about that. I then have to make a judgement as to whether or not I think this change is permanent or temporary in nature. I then check the dividend yield on my cost basis and decide if that's enough to keep me holding the investment... how much pain am I willing to accept and what's the future (crystal ball) say.
In other words -- there's a hell of a bunch of factors to think about before hitting the sell button. And I guarantee the day you sell - the stock will take off upward again. Just like the day you buy it will go down. It's the nature of the market to test you.