When to Sell?When describing the MFI approach, Greenblatt readily admitted he had trouble finding an optimal time to sell. At the end, he essentially punted - saying to be driven by taxes - so if a stock is up, wait until you have held for one year and if a stock is a loser, sell just before the year is up.
I do not have a great answer. I do think it is relatively important not to sell based on emotion. So I think I will base upon several items:
- My intent is only to look at each stock once a year to decide. I will pick the anniversary date, which I list below (so MNDO will be next).
- If the stock is a non financial stock, I will likely keep so long as it is a top decile stock.
- If the stock is a financial stock, the call will have to be a judgment call.
- I want to keep balance between sectors. I have not really defined what "balance" is, but will work on it.
- Finally, I want to keep a balance between stocks and bonds. Right now I am about 15% bonds (in this portfolio). That seems like a reasonable start, though over time I'd like to get that to about 25%. Once I am at 25%, the goal will be to keep it around there.
| Stock | Shares | Ann Dividend / Share | Yield | Projected Dividend | Sector | Worth | Anniversary |
| AZN | 424 | $ 2.40 | 5.0% | 1,018 | Pharma | 20,236 | 1/6 |
| BHK | 2,908 | $ 0.80 | 5.9% | 2,338 | Bond | 39,886 | 7/6 |
| CEL | 1,544 | $ 2.05 | 13.0% | 3,166 | Utility | 24,339 | 6/29 |
| CPL | 1,000 | $ 1.27 | 4.4% | 1,270 | Utility | 29,020 | 9/29 |
| CSCO | 1,806 | $ 0.24 | 1.2% | 433 | Tech | 35,614 | 4/25 |
| CSQ | 5,065 | $ 0.63 | 7.1% | 3,191 | Hybrid | 44,899 | 8/23 |
| DD | 500 | $ 1.64 | 3.3% | 820 | Chemicals | 24,570 | 12/9 |
| ENH-PA | 1,000 | $ 1.94 | 7.4% | 1,938 | Bond | 26,170 | 1/17 |
| FCX | 503 | $ 1.00 | 2.3% | 503 | Basic Resources | 21,967 | 11/28 |
| GCAP | 3,000 | $ 0.20 | 3.2% | 600 | Services | 18,780 | 1/12 |
| HPQ | 804 | $ 0.48 | 1.7% | 386 | Tech | 23,044 | 11/22 |
| INTC | 1,271 | $ 0.84 | 3.1% | 1,067 | Tech | 34,044 | 9/17 |
| JQC | 4,483 | $ 0.80 | 9.3% | 3,587 | Hybrid | 38,736 | 7/8 |
| KMF | 1,760 | $ 1.60 | 6.2% | 2,816 | Pipelines | 45,535 | 9/15 |
| KSW | 13,048 | $ 0.15 | 4.4% | 1,957 | Construction | 44,233 | 5/2 |
| LNC | 2,424 | $ 0.32 | 1.4% | 776 | Insurance | 54,916 | 11/10 |
| MNDO | 13,678 | $ 0.20 | 8.6% | 2,736 | Tech | 31,678 | 2/4 |
| MSFT | 947 | $ 0.80 | 2.7% | 757 | Tech | 28,023 | 12/6 |
| PM | 436 | $ 3.08 | 4.1% | 1,343 | Consumer | 32,372 | 6/7 |
| PRE | 505 | $ 2.40 | 3.7% | 1,211 | Insurance | 32,491 | 9/7 |
| PVD | 397 | $ 3.70 | 5.2% | 1,470 | Finance | 28,010 | 8/5 |
| RTN | 458 | $ 1.72 | 3.5% | 788 | Defense | 22,772 | 7/14 |
| SBS | 1,035 | $ 2.39 | 3.9% | 2,473 | Utility | 64,106 | 5/10 |
| SLF | 2,719 | $ 0.64 | 3.1% | 1,740 | Insurance | 56,619 | 6/29 |
| STD | 4,216 | $ 0.64 | 8.2% | 2,698 | Finance | 32,712 | 12/1 |
| STO | 1,000 | $ 0.94 | 3.7% | 940 | Basic Resources | 25,250 | 11/23 |
| USB | 2,108 | $ 0.50 | 1.8% | 1,054 | Finance | 59,712 | 9/29 |
| VR | 1,925 | $ 1.00 | 3.2% | 1,925 | Insurance | 60,926 | 3/3 |
| WBK | 489 | $ 8.13 | 7.5% | 3,978 | Finance | 53,019 | 11/19 |
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1 comment:
This is one of the reasons I really like the MFI approach. There is a built in sell trigger (at 1 year after the buy date). For me, this is in a tax free account, so the precise sell date (1 year +- a day) is irrelevant.
Not having that built in sell date, I'm not sure I could objectively determine whether to sell or keep a stock. Sure, if the P/E skyrockets, or other fundamentals drastically change, I could likely make the call. But it's never that clear cut :)
MFI takes the emotion out it completely for me.
- On the list after a year?: Keep it (buy or sell a little to get back to my targeted %)
- Not on the list: sell it.
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