To Sell or to Hold Checklist (Part 4 of 5)

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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