undervalued Posted July 10, 2015 Share Posted July 10, 2015 What do you guys usually do about under performing stocks? Sell or wait it out? Since you can't really tell when the company will start performing (for example, LUK), is it a good idea to sell and purchase another undervalued stock? Link to comment Share on other sites More sharing options...
scorpioncapital Posted July 11, 2015 Share Posted July 11, 2015 I slowly sell if each additional data point confirms my sentiments about management. But I don't sell all. Just enough to sleep well. A schedule is good. X amount every X days,weeks or months. Link to comment Share on other sites More sharing options...
undervalued Posted July 11, 2015 Author Share Posted July 11, 2015 That's pretty good strategy. I am thinking of doing that with the winner also. Anyone else has any suggestions? There are a lot of strategy on when and what to buy but rarely on when to sell. Link to comment Share on other sites More sharing options...
orthopa Posted July 11, 2015 Share Posted July 11, 2015 I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you. If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake. I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things. Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out. Link to comment Share on other sites More sharing options...
undervalued Posted July 12, 2015 Author Share Posted July 12, 2015 I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you. If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake. I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things. Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out. I have averaged down LUK since 2008. My average price is about $22. There has been a few times in the past where it has reach $35 and it has come back down again since then. I am fine with holding it a long time. I guess I should hold on to it and get ready to reduce when it reach mid $35 (around 1.2 BV) probably. Link to comment Share on other sites More sharing options...
ScottHall Posted July 12, 2015 Share Posted July 12, 2015 It depends, to me. I used to own Loews, but ultimately ended up selling it because of a combination of its businesses being lousy and management refusing to do anything ever. It's much easier to hold on to underperforming companies if management is proactively creating value and the underlying business is performing pretty well. Pardee has trailed badly since I bought it, but I continue to hold it because I like most of the moves management makes and the economics of the business have remained pretty attractive despite the weak energy markets. Link to comment Share on other sites More sharing options...
scorpioncapital Posted July 12, 2015 Share Posted July 12, 2015 You could also use the Buffet test of $1 of share price gain for each $1 of IV increase but it's easy to pass this test and not end up any richer if say book value grows very little. I'd compare BV gains and stock price gains and have a minimum threshold of performance. Link to comment Share on other sites More sharing options...
orthopa Posted July 14, 2015 Share Posted July 14, 2015 I think its also important to understand why its under performing. If you feel like you can truly value the company and the market is just not giving it the value justified then I dont see that as a reason to sell. In Grahams words the market is there to serve you not guide you. If a stock is under performing because the business is consistently under performing then that is a clear sign to sell or rethink its value to see if you made a mistake. I have a large portion of my portfolio in PM and it has traded sideways for a couple years due to currency issues. The underlying business is doing great. It has been a slight drag on my portfolio outside of the divs but I believe the currency issues will eventually swing to a tailwind. As a result Im comfortable holding it. If the underlying business fundamental deteriorate then I need to re examine things. Under performance is usually magnified by gross exposure so lightening up a little will make it a less painful. Again if its a stock you believe good enough to hold for 10 years even if the market closed (quoting Buffett again) the under performance could be a market misjudgement that you have to wait out. I have averaged down LUK since 2008. My average price is about $22. There has been a few times in the past where it has reach $35 and it has come back down again since then. I am fine with holding it a long time. I guess I should hold on to it and get ready to reduce when it reach mid $35 (around 1.2 BV) probably. Has the IV of the company increased since you bought it in 2008? Link to comment Share on other sites More sharing options...
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