Portfolio Management Workshop

http://www.bivio.com/crowriver/file/Public/Webpages/Portfolio%20Management%20Workshop.pdf

To Sell or to Hold Checklist

To Sell or to Hold Checklist
http://www.bivio.com/crowriver/files/Webpages/To%20Sell%20or%20to%20Hold%20Checklist.pdf


Portfolio Management Workshop


PORTFOLIO MANAGEMENT

Portfolio Management essentially consists of the activities that help investors reach desired investment goals. It is the art of optimizing holdings and increasing the value of a portfolio. And it takes some common sense and diligence to do it successfully. At times, it even takes a little courage.

This workshop will discuss the process and the tools at your disposal to make the most of your investments. It may also suggest some answers to some of the questions you may have about when or why you should sell your stocks and what you might want to do in today's market.

Stock bargains: 5 tips to protect against falling knives

Written by Reuters
Saturday, 10 September 2011 21:45


For bargain-hunters, identifying stocks in this struggling market might seem like an easy layup. Some prominent companies are languishing in the 99-cent bin, trading at seemingly laughable price-earnings ratios.

Consider Hewlett-Packard, on offer for a current P/E of 5.7. Then there’s BP at 5.9, Capital One at 5.8, Gannett (GCI) at 4.95 and Hartford Financial at five.

In normal times, it would be a no-brainer to load up your shopping cart. But these are hardly normal times, and there can be very good reasons why companies might be trading at such low valuations. As any Bear Stearns or AIG shareholder can tell you, it’s a tricky proposition to – as the investing saying goes – “catch a falling knife”.

That’s what has investors like Michael Gleason paralyzed. Gleason, an American TV producer who lives in London, would like to put more money to work – but the panicked gyrations of the markets don’t give him any confidence. “I’ve gone on hold lately, because volatility has gotten a bit worrying,” says Gleason, 57. “Maybe it’s better to stay out then to get out.”

And there’s the dilemma of every deep-value investor: How to decide when to take that risk, and make potentially the best pick of your investing lifetime instead of the worst. Sometimes it’s a very fine line. Could embattled Societe Generale bounce back smartly, for instance, or could it go down in flames like Lehman Brothers?

“Three years ago investors started catching falling knives, and got badly bloodied,” recalls Hank Smith, chief investment officer of equities at Radnor, Pennsylvania-based Haverford Investments, which has $6.5 billion under management. “Even though they were doing all the things they were supposed to be doing, like buying on dips. But there are a few ways to avoid the falling knife, both on a macro and a stock-by-stock basis.”

The trick is to separate those stocks that are merely beaten up, from those that may be down for the count. A few key criteria to keep in mind:

Look for yield support
NEW YORK: A stock will be less likely to crash and burn if it has some appeal to dividend-hungry investors. That’s why Jim Barrow, who manages Vanguard funds like Windsor II and Selected Value, has snapped up names like AT&T, Johnson & Johnson, and Texas utility CenterPoint Energy. “If you have a strong company with a five or six percent yield, how much lower can it really go?” asks Barrow. “That’s one of the key things we look at.”

Stay away from Europe for now
Real gamblers might be attracted to the rock-bottom valuations of European firms, but it’s just too much of a risk, says Barrow. With the prospect of sovereign defaults cropping up from multiple locations like Greece, Portugal and Ireland, we haven’t witnessed the Eurozone endgame yet. In the meantime, there’s no sense putting yourself in harm’s way. “I wouldn’t go out on a limb,” says Barrow. “We still don’t know how low Europe can go.”

Steer clear of banks
Financials may have made some strides in cleaning up their balance sheets since the meltdown of 2008. But they’re not there yet, says Smith. Many are still loaded down with assets that are difficult to value and trade, which could lead to the same mark-to-market problems with banks and insurance companies we saw before. That means cautious investors should give them a pass.

Opt for growth
A tech giant like a Hewlett-Packard might seem like a steal, lurching near its 52-week lows. But as it looks to shed many of its business lines, and focus on the software-and-services niche that still only generates a small slice of its revenue, Hank Smith is glad he sold his firm’s position months ago. Instead, look for companies with encouraging growth strategies, along with healthy cash flow, exposure to emerging economies, and low levels of debt.

Defense wins championships
If it’s downside risk you’re most worried about, then simply stick to traditional defensive sectors like utilities, telecom, consumer staples and pharmaceuticals. Stocks like Diageo or Philip Morris, which Barrow owns, aren’t going anywhere anytime soon. “Demand for those things doesn’t change,” he says. “Even if things get real bad.”

Chris Taylor is an award-winning freelance writer in New York City. A former senior writer with SmartMoney, the Wall Street Journal's personal-finance magazine, he has been published in the Financial Times, Bloomberg BusinessWeek, CNBC.com, Fortune, Money, and more. He has won journalism awards from the National Press Club, the Deadline Club, and the National Association of Real Estate Editors. The opinions expressed are his own.

My strategies for buying and selling (KISS version)

Strategies for buying and selling.

For buying (ABC):

A.  Assess Quality, Management and Valuation (QMV)

B.  Buy good quality stocks.

C.  Buy these stocks at a discount (Margin of Safety)

(If you select your stocks carefully, often one can hold them for long periods. The idea is to allow compounding over the long period to work in your favour.)


For selling (1,2,3,4):

1. If you need cash for emergency. (But then, hopefully, you will have separate money for such emergencies. The cash invested into the market should be separate.)

2. You will need to sell URGENTLY (QUICKLY) if there is something wrong with the fundamental of your stock (example: fraudulent accounting, etc). At other instances, you do have the time to SELL at leisure.

3. Your stock has gone up too high. By your assessment, at that price the upside return is less, but the downside risk is more, then you may wish to sell to REINVEST INTO ANOTHER STOCK WITH MORE FAVOURABLE UPSIDE REWARD/DOWNSIDE RISK RATIO.

4. On occasions, you have identified a very good BARGAIN, you may wish to sell some of your stocks to REINVEST into these stocks to capture a higher upside/downside reward risk ratio that these stocks offer.

Defensive Portfolio Management = 2.
This is to prevent harm to the portfolio.
Urgent attention needed.

Offensive Portfolio Management = 3 & 4.
This is to optimise returns of the portfolio.
Have the time to sell at leisure.


BB
"Investing should be fun and not a game."


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QMV
Quality = Points 1 to 6
Management = Point 7
Valuation = Point 8






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Additional Related Notes:

Why do you Sell and When?

Reducing serious loss

When the fundamentals of a stock have deteriorated, sell to protect your portfolio. This decision should be make quickly based on the facts and situations, in order to keep your losses small.


Taking profit

Profit should be realised from sales of stocks in the following situations:
(I) when the stock is obviously overpriced, or
(II) when the sale of the stock frees the capital to be reinvested into another stock with potentially better return.

Not taking profit in the above situations can harm your portfolio and compromise its returns. In other circumstances, let the winners run.

Underperforming stocks should also be sold early. Hanging onto underperforming stocks is costly too. There is the opportunity cost that the capital can be better employed for higher return. Also, hanging onto these lack-lustre stocks reduces the overall return of your portfolio.
http://myinvestingnotes.blogspot.com/2011/02/why-do-you-sell-and-when.html

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Related:

The Time to Sell: How Warren Determines It is Time To Sell

• The first is when you need money to make an investment in an even better company at a better price, which occasionally happens. 
• The second is when the company looks like it is going to lose it durable competitive advantage.  A questionable competitive advantage is not where you want to keep your money long-term. (An example:  Nokia's Cautionary Tale)
• The third is during bull markets when the stock market, in an insane buying frenzy, sends the prices of these fantastic businesses through the ceiling. 

When to Sell?  The QVM Approach to Selling Stocks

Portfolio Management - Defensive & Offensive strategies

Strategies for maintaining your portfolio as advocated by Better Investing is simple and can be followed. You sell your shares if you:

1) need cash for emergencies

2) defensive management of your portfolio when a stock's fundamental has turned bad, and

3) offensive management of your portfolio to maximise/optimise returns.


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http://biwiki.editme.com/portfoliodesignandphilosophy

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