Showing posts with label stay with the winners. Show all posts
Showing posts with label stay with the winners. Show all posts

Sunday 16 July 2017

Sell the losers and let the winners keep riding


For long term investing success it is important to ride a winner. 

Ever so often, investors make profits by selling their appreciated online stocks, but hold onto stocks that have declined in hopes of a rebound. 

If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. 

Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice.

If you have a personal preference to sell after a stock has increased by a certain multiple - say three, for instance - you may never fully ride out a winner. 

No one in the history of investing with a "sell-after-I-have-tripled-my-money" mentality has ever succeeded.

Don't underestimate a stock that is performing well by sticking to some rigid personal rule - if you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting.

Sunday 7 April 2013

Invest like Buffett - Hold on to your Winners Forever

Best holding period is holding forever.
Sell your losers, hold on to your winners.

SELL THE LOSERS, LET THE WINNERS RUN.
Losers refer NOT to those stocks with the depressed prices but to those whose revenues and earnings aren't capable of growing adequately. Weed out these losers and reinvest the cash into other stocks with better revenues and earnings potential for higher returns.




< I suggest this video: http://www.youtube.com/watch?v=WVqyCRYBieI >
Newbie
on 4/7/13

Thanks to Newbie for highlighting this video to me.

Wednesday 7 April 2010

It is the selling of losers that is the wealth-maximizing strategy!

Many investors will not sell anything at a loss because they don't want to give up the hope of making their money back. Meanwhile, they could be making money somewhere else.


So, do you behave in a rational manner and predominately sell losers, or are you affected by your psychology and have a tendency to sell your winners? 


This is not a recommendation to sell a stock as soon as it goes down in price - stock prices do frequently fluctuate. Instead, the disposition effect refers to hanging on to stocks that have fallen during the past six or nine months, when you really should be considering selling them. 


Don't hang on to chronic losers! Not only do you lose, but you also lose the out on opportunities to gain. If it's broke, fix it!




It is the selling of losers that is the wealth-maximizing strategy!


Ref:

Emodons Rule

Wednesday 13 January 2010

Winners Keep on Winning

Winners Keep on Winning
By Rick Aristotle Munarriz
January 12, 2010


Some of last year's biggest winners aren't showing any signs of slowing down in 2010.

From resurgent automaker Ford (NYSE: F) to comeback kid Sirius XM Radio (Nasdaq: SIRI), many of the stocks that thrilled investors by doubling, tripling, or taking even bigger steps through 2009 are off to races again this year.

Take Dollar Thrifty Automotive Group (NYSE: DTG), for starters. Auto rental agencies were scorchers last year after being left for dead in 2008. Dollar Thrifty and Avis Budget (NYSE: CAR) appreciated several times over after bottoming out early last year. In Dollar Thrifty's case, the stock that began 2009 priced at a mere $1.09 closed out the year revving up to $25.61.

Dollar Thrifty now finds itself fetching $27.58. A nearly 8% gain may not seem all that scintillating, but keep in mind that we're just six trading days into the new year. Whole Foods Market (Nasdaq: WFMI), Ford, and Sirius are off to even better starts in 2010.

Company
2009
2010

Ford
337%
21%

Sirius XM Radio
400%
15%

Dollar Thrifty
2,250%
8%

Whole Foods
191%
8%


Source: Yahoo! Finance.


The momentum is impressive, since this could have been a logical time for many giddy investors to cash out. Instead of a hefty capital gains hit in 2009, many could have punched out at the start of 2010.

Why are they still hanging on? Well, the prospects are a whole lot brighter for these four companies now than they were a year ago.

Ford hit a new 52-week high yesterday. Technically speaking, it's closer to a 250-week high, since Ford hasn't traded this high since March of 2005. It's hard to bet against the automaker, especially after its head-turning 33% surge in December sales.

Sirius XM Radio had a prosperous 2009, particularly in the latter half of the year, when subscriber growth resumed and cash flow growth accelerated. Like many of last year's winners, Sirius XM had the luxury of an easy starting line -- its stock began the year at a just $0.12 a share -- but its surprising breakeven third-quarter results and renewed optimism for auto sales, where most of its new subscribers are coming from these days, find the satellite-radio monopoly sitting pretty.

Analysts see Dollar Thrifty earning $1.52 a share this year. Yes, it's expected to earn more than its entire market cap at the start of 2009. An economic recovery has lifted hopes for upticks in corporate and leisure travel, and Dollar Thirfty is a clear beneficiary.

Whole Foods is another company positioned for a big bounce if the economy continues to improve. Shoppers cut back on expensive organic groceries during the recession, but they should storm back soon.

So why are 2009's winners among the stocks with the healthiest starts in 2010? That's easy. They're earning it.

http://www.fool.com/investing/general/2010/01/12/winners-keep-on-winning.aspx

Thursday 3 September 2009

Tips On How To Maximize Stock Profits

Tips On How To Maximize Stock Profits
By Mark Crisp


When the stock market marches into record territory like it has been, it's tempting to take some shares off the table. The prudent investor, it's been said, will sell his losers and keep his winners. To maximize stock profits, the goal is to keep profits from the winners. Holding onto losing positions, or worse, adding to them, can put a dent in those profits.

Some stocks will buck the trends of their sector or the general market. If there are no buyers for a stock it is probably a good idea to get out of that stock and put your money somewhere else. This means that you need to keep winners, and cut laggards and losing stocks.

Knowing when to buy and sell is probably the most challenging aspect of investing. It's been said that timing is everything, and that's certainly true for small investors who want to maximize stock profits. While there are many systems and methods dedicated to market timing, certain observations can help one make an informed decision.

Investors seek every clue and advantage to know when it is best to buy or sell, and many canny stock traders watch volume. Volume is a simple matter of the total shares traded during a single market day. Modern technology tracks trading volume minute by minute in real time and some use this routinely. An investor can seize an opportunity by using signals like volume because they telegraph changes, and increasing volume is linked to price volatility and the greater the volume, the more likely the prices will also be extremely increased or decreased.

Scaling in and out of positions is an additional way to maximize stock profits. Rather than completely buying in or selling out of a position it is conventionally considered prudent to purchase part of a position as a stock rises, and selling part of it when getting out. In this process the investor knows that they are buying a winner heading up, while not being overly greedy by holding their position for too long when selling time has come.

In today's bull market, there are plenty of high performing stocks to chose from, and getting in at the right time can mean difference between making a little and making a lot.

Maximize stock profits by selling loser stocks and keeping winners. Gut laggards that fail to grow in the sector or the whole market. Timing is everything. Watch for certain key signs when investing, like watch volume. Increasing volume usually mirrors increasing volatility in price. Huge volume days can signal a near term high or low in price. Carefully watch volume signals and daily trading activity to make the best profit possible. Another way to maximize stock profits is by scaling in and out of positions. Buy a winning stock on the way up but do not be too greedy and hold the stock too long.

Article Source: http://EzineArticles.com/?expert=Mark_Crisp

http://ezinearticles.com/?Tips-On-How-To-Maximize-Stock-Profits&id=821183

Wednesday 2 September 2009

Getting Out While the Getting's Good

Getting Out While the Getting's Good
By WALTER HAMILTON
September 18, 1998

When should you sell a stock? If you're bargain hunting in today's dicey market, the answer is sooner rather than later--that is, if the stock moves against you.

The market's summer plunge has made for some good buying opportunities. But it has also made for a risky investment climate in which it's easy to lose money quickly, experts note.

To protect against that, some investment pros say individual investors should take the bold step of jettisoning any stock that falls as little as 8% from the price at which they bought it.

The reasoning: For most of the 1990s' bull market, stocks often bounced back quickly from trouble as a rising tide lifted most boats. But today, a stock that begins to sink may quickly crash--and stay down.

"The very best investors I know have very set parameters for losses," said Jonathan Lee, managing partner at Hollister Asset Management, a money management firm in Century City. "They say: 'I'm going to buy and have very tight risk parameters. If it goes down 5%, I'm out.' "

Dumping a stock that drops 8% or so from your entry price may sound drastic. Even in a good market, prices naturally ebb and flow, and an investor who sells after a small loss could subsequently watch the stock rebound.

Indeed, conventional wisdom is that an investor needn't reexamine a stock unless it declines 15% or more. If a stock has fallen simply because of market sentiment--rather than because of a fundamental change in the company's prospects--traditional thinking says an investor should hold on.

But in a high-risk market like this one, one or two sizable losses can crush a portfolio.

Think about this: If an investor waits to sell a falling stock until the loss is 20%, and then reinvests the proceeds in another stock, that new holding must rise 25% just to recoup the original amount. After a loss of 30%, a fresh holding must climb 43% to get the investor back to even.

*

Some pros take a more basic view of why losers should quickly be sold.

"The best reason why you should not hold [a losing] stock is . . . you've made a mistake," said David Ryan, head of Ryan Capital Management, a Santa Monica-based hedge fund.

Ryan is a onetime protege of William O'Neil, an investment legend and founder of Investor's Business Daily newspaper. O'Neil has long been one of the more vocal proponents of the "8%-loss-and-out" sell rule.

Note that this rule applies only to newly purchased stocks--not to price moves in shares that an investor has owned for a while and that have appreciated in value.

In those cases, assuming you're holding the stock as a long-term investment, interim moves that may erase some of your gain (without reducing your original principal) are OK to ride out, so long as they reflect overall market weakness rather than problems specific to the company.


The conventional thinking about sticking with a stock that falls sharply from your purchase level also misses another point: A stock often turns down before an erosion in the company's fundamentals is readily apparent.

Even the most diligent investors have trouble getting access to the best information. They may not know exactly why a stock is going down, but they can often infer from the action in the shares that the company's outlook is dimming.

"Many times a stock will tell you something bad about the company before anyone else will," said Tom Barry, investment chief at George D. Bjurman & Associates in Century City, which manages $1 billion.

*

But what about the practical issues involved in quickly selling stocks that move against you? True, there are commission costs. And depending on market conditions, an investor may end up taking a large number of losses.

Still, better to take smaller losses than risk that they become major losses, many pros say.

Investment legend Peter Lynch has long noted that investors are likely to make the bulk of their profits in a relative handful of stocks that rise dramatically over time. Most stocks in a portfolio, Lynch has said, will be mediocre or poor performers. Thus, keeping losses to a minimum assures that your few big gainers aren't watered down by big losers.

Indeed, many pros insist that small investors' prime mistake usually is to hold losers too long, hoping to at least break even.

"There are too many companies where things are going great. Why not switch?" Barry said. "There are so many people who don't want to admit a loss, so they hold their losers. We do the opposite. We sell the losers and keep the winners."

Psychologically, the 8%-loss sell rule may be easiest to observe in the case of higher-priced stocks. An 8% drop in a $50 stock is $4, while for a $25 stock it's only $2.

Still, investors should remember to focus on the percentage loss, not the dollar amount.

*

To see the benefit of the 8% sell rule in action, imagine you bought Chase Manhattan at its July 31 peak of $77.56. Let's say you disregarded the sell rule, which would have gotten you out a mere two days later at about $71, as the stock slumped.

You might have figured that Chase, as a blue-chip stock, would be insulated from a sharp drop.

But amid deepening worries about U.S. banks' potential trading and loan losses overseas, Chase shares have plunged to $47.88 now--a drop of 38% from the peak.

It's entirely possible that the fears are overdone and that Chase will emerge unscathed from the current global turmoil.

But it remains to be seen whether an investor who has ridden the stock down will be able to claim the same thing.

*

Times staff writer Walter Hamilton can be reached by e-mail at walter.hamilton@latimes.com.




http://articles.latimes.com/1998/sep/18/business/fi-23902

Tuesday 1 September 2009

Ride your Winners, Dump your Losers

Ride your Winners, Dump your Losers

--------------------------------------------------------------------------------
If you are a momentum trader that trade purely on the basis of a surge in price and high trading volume, it is wise to scramble for the exit when the stock loses its momentum. However if you have picked the stock on the basis of its valuation, the fact that it drops more means it is even better value – time to buy more instead of sell. Obviously if the fundamentals (future prospects and changing sector conditions) of the company have deteriorated, you may need to admit your mistake and sell.

This theory sounds more credible than it really is in countering the human tendency to keep the losers. The fact that it identifies a stock as a winner or loser on the basis of the entry price already introduces an element of subjectivity. An emotion free investor would only look objectively at the fundamentals and the valuation of the stock, instead of getting hung up on the entry price.


http://www.italkcash.com/forum/general-stock-market/98561-ride-your-winners-dump-your-losers.html

Thursday 18 June 2009

Stay with the winners - don't get shaken out

Let us learn about the size of some market moves and the lengths of time involved, using some very well-known examples. All of these were big moves over a number of years, and few people expected them.

DJIA: This had an almost uninterrupted run in the 1990s when it rose from under 3,000 to over 11,000 by the end of the decade.

Gold: This had a big fall from $400 in the mid 1990s to about $250 in 1999 before moving higher to $400 by end 2001.

Crude oil: This has had some big moves.

  • Driven by OPEC and events in Iran and Iraq, the oil price rose from a few dollars per barrel in 1970 to over $35 by the early 1980s.
  • It then collapsed to under $10 per barrel by December 1988.
  • With the Iraqi invasion of Kuwait and the Gulf War, the price spike to over $38 in 1990.
  • Improved drilling and production techniques in the 1990s saw the price fall to below $10 by 1999.
  • With the troubles in Iraq it then rose close to $50 in 2004 and climbed to over $60 in 2005 with Hurricane Katrina.
A roller coaster ride by any standard.

Currencies: This too, have had some incredible shifts.

  • In early 1984, 1 dollar bought about 250 yen.
  • Now it buys less than 110 yen.
  • After the euro started trading as a theoretical currency in January 1999, it sank from a first day high of nearly $1.20 to around $0.80 about two years later.
  • It then recovered to over $1.30 in early 2005.

It is astounding that the world's most important exchange rates can have such big moves.

Housing: Housing prices are estimated to have more than doubled during 1997 to 2004 in UK and Australia, and nearly tripled in Ireland. In the US, the rise has been a more modest 60% or so. Who would have thought that these moves could happen? Not the economists, property experts or the press.

These are the types of opportunities that should appeal to you. If you can correctly identify the changes in the fundamentals, you may have plenty of time to take a position and enjoy a very favourable move in the price.

Over the years, by recognising that prices go further than expected, you can profit more by staying on winning ideas. Long after many others have sold out of winning positions, by persisting, you might be amazed by how far the market subsequently went.