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To Sell or to Hold Checklist
Company: ______________________________
Ticker:_______________
Prepared by: ____________________________
Date: _______________
A. Consider Selling
If you need cash
Consider selling shares that will improve diversification.
Consider selling the stock with lowest potential return.
Consider selling the lowest quality stock .
If company's fundamentals deteriorating
Slowing or falling sales growth is warning sign.
Check TTM growth rates in PERT A.
Read about peers, industry, and economy to determine if problems
short or long term. Sell if problems appear long term.
Consider selling if management keeps making excuses.
Increasing long-term debt may be warning. Look at graph in NAIC
Stock Analyst or your favorite financial website.
Adverse management changes
CFO departs unexpectedly
Several key executives depart
Death of several key executives
Significant increase in competition
Watch to see if it affects profit margins in SSG and PERT A.
Product problems
Decline in pipeline, e.g., drug companies
Same-store sales declining, e.g., retail companies
Worsening product mix
Increasing dependence on one or two products
Customer problems
Customer base shrinking
Company becoming overly dependent on one or two customers
Company's debt rating has been lowered
Can be forewarning of future problems
Indications of fraud or accounting problems
Investors will be last to know if company falsifying financial data.
If the source of information is credible, sell fast.
Uncontrolled raw material costs
If company doesn't hedge, it may have to pay higher prices for the
materials, which will hurt profit margins.
Stock appears significantly overvalued
Update SSG. Do not use overly conservative judgments.
Forward RV is over 150%
Upside-downside ratio is below 1
Potential total return is less than money market fund or CD
If you want to diversify your portfolio
If one stock becomes large percentage of portfolio, try to add to
other positions.
If you don't have money to add to smaller holdings, sell a portion of
the large position.
If stock is a very small percentage of portfolio, add to it or sell it.
If you want to improve portfolio quality
Look for a higher quality company and compare them with SCG
If company is acquired
Do SSG on acquiring company. Sell your stock if SSG of acquirer
doesn't meet your standards.
Take capital loss
Can sell stocks in taxable account at a loss to offset capital gains
Can use another $3,000 of capital losses to offset ordinary income
Evaluate stock for repurchase after 30 days to avoid wash sale.
B. Consider Holding
When there is temporary bad news
Read about peers, industry, and economy to determine if
problems are temporary.
If it is near the end of the quarter
Consider holding to see the earnings release
The price is down, but the fundamentals are strong
Update your SSG and PERT and check the fundamentals
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