Selling losers??

[Dividend Watcher]

(01-24-2014, 09:53 PM)Robandcindy2 Wrote: I can rationalize some oil/energy stocks being down in value right now.

I can grasp my REITs being down as the investment world comes to grips with QE.

But I do have shares in some companies that are down quite a bit for no other reason than "Wall Street ain't happy with them."

Do I sell and lock in the loss forever or wait it out? In several cases I admit I own the stock because it BELONGS in a DGI portfolio but unlike Mr. Magellan Fund I only know about the company by what I can read on the net...(...buy what you know...)

Rob, if you can rationalize the first two, why not the third? To me, if you've chosen well and confident that earnings will continue and the dividend will continue to increase (maybe not as much as you want right now for either), then just because Mr. Market is punishing a company for whatever reason is no reason to sell. That only locks in your loss.

Now, if you way overpaid and now you realize it, perhaps it would be wise to get out and wait for it to come back to some reasonable valuation. If it's something that can be made up with a couple more years of growth under it's belt, then maybe patience would be the better virtue.

I think Warren Buffet, Peter Lynch and Benjamin Graham all mentioned on more than one occasion that they've sometimes waited several years for Mr. Market to recognize the value in a company. For me, I take it as a given that any stock I buy is going to drop for a while before I'm in the black. If it goes up right away, it's a bonus.

(01-24-2014, 09:53 PM)Robandcindy2 Wrote: Right now the only triggers I have are a cut in the dividend, a rapidly rising dividend, and an inability to afford the dividend payment.

What do you use...?

Rapidly rising dividend? I would think that would be good unless the payout ratio become excessive.

I use:

* Cutting the dividend. Freezes are OK if there's something management is open about and has a plan; e.g., INTC is still frozen but they're in the middle of a big research & refocus of the business although my patience is getting shorter.

* Way overvalued AND there's a good alternative available that improves the portfolio (yield or diversity). Usually this is more a trim than complete sell unless the position is small.

* Something's changed in the business and earnings aren't growing. This is a longer term watching. Again, you have to see what management says about it.

Over the last few years, I've become more sensitive to the income stream than pricing for stocks I already own.