The best guru stock selling strategies

[dabuff]

I read in the book "There's Always Something to Do" that he would sell half of his stake in a stock once it rose by 100% (thus the rest of his stake was a "free ride"). Does anyone use this strategy themselves? I've been hard pressed to find any evidence backing any particular strategy.

 

Here are some other famous investors and their strategies:

 

Li Lu - when it is at a price you would no longer consider buying it

David Dreman - when the stock PE/PB approaches that of the general stock market (or 2-3 years after purchase).

 

Would be happy to hear any thoughts or additions to the list.

 

 

[OracleofCarolina]

I like to keep it simple, I average in when I think it is cheap and then average out when I think it is expensive

[jawn619]

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon."

[Jurgis]

I sell the guru at the top.

 

<pun intended>  ;D

 

 

 

Nowadays my investments are in 4 categories:

 

1. Hold forever - sell never except for major disruptions (owner operator dies pretty much).

2. Moat based long term holds. I have not decided when to sell these. Might be interesting topic to discuss.

3. Theme plays. For example, oil plays nowadays. Sell when theme works out.

4. Lottery tickets. Sell when lottery works out.

 

So ultimately, I am trying to sit tight and not sell on valuation anymore (except perhaps category 2 - unclear). And I am trying not to buy stocks where I'd have to sell on valuation (except perhaps category 2).

Categories 3 and 4 are somewhat valuation based, but theme/lottery are more important than valuation.

 

In the past sitting tight was tough for me, we'll see how it goes this time. :)

[ritrading]

Buffett's policy is to do share repurchases of BRK when market price is at or below 110% of book value. This is perhaps the best policy I've seen in any company to ensure that you don't overpay for a stock.

 

I recommend the reverse for exiting your positions. Exit when the market price is some threshold percentage above intrinsic value, or whatever value you can calculate for the company.

[Guest Schwab711]

I've been using expected return ranges to estimate my efficiency in portfolio allocation and determining when to buy/hold/sell. Once a stock's ERR (expected return range) is fully below my MRR (minimum required return [range]) then I would look to sell a forever holding (to avoid Buffett's regret of not selling KO in 2000). I've interpreted this to be along the same lines as Buffett's thinking. However, I think the how and why you sell should be extremely dependent on what you are holding (qualitative, stability of earnings, ect) and your personal financial condition/needs. There's a big difference between deep-value and high-quality holdings, but in general it should be based on expected returns.

[Hershey]

Basically, I calculate the after tax value, and then see if there is something worth buying that will get me to the nominal value of what I sold + the implied capital gain tax.  I also factor in lost dividends.  This is from a research booklet I got from Tweedy Browne many years ago.  Invariably, this strategy leads me to hold on in almost every instance where I have a sizable gain.

[Jurgis]

Basically, I calculate the after tax value, and then see if there is something worth buying that will get me to the nominal value of what I sold + the implied capital gain tax.  I also factor in lost dividends.  This is from a research booklet I got from Tweedy Browne many years ago.  Invariably, this strategy leads me to hold on in almost every instance where I have a sizable gain.

 

But your selling threshold in tax deferred account would be much lower than in taxable one.

[Hershey]

Yes.