Selling at the right time is more difficult than buying. – Gerald Loeb
You’re holding shares of ownership of companies (stocks), reaping earnings over the years, and perhaps you are wondering, “When do I sell this stock?” or “What is my exit strategy?” Maybe you have held a stock for a number of years, and you look at the chart and think, “This stock hasn’t done anything in a decade!” When you bought the stock, you may have had a lot of conviction about the future of the company. You were patient and careful to pay a bargain price relative to the intrinsic value of the company. But now the hard part: when to sell.
For high-quality companies, the answer can be never. These are the companies that an investor strives to find and add to their portfolio. The stock prices trade up, down and sideways but the investor is more concerned with the companies’ earnings, cash flow, book value, economic moats, etc. The investor will consider the earnings year after year more than the stock prices. Perhaps half of the earnings they realize are in the form of dividends, and the other half is reinvested in the growth of these companies. In the long term, the stock prices will reflect these attributes, and the investor will realize a total return (dividends plus growth).
You should hold these high-quality companies even through a bear market. As Seth Klarman says, “In reality, no one knows what the market will do; trying to predict it is a waste of time and investing based on that prediction is a speculative undertaking.” You paid a good price for the company and have earned dividends over the years, so you will likely not have to endure the full brunt of a bear market. Your recovery time may be significantly less than the S&P 500.
There are moments when you find a better opportunity (a quality company or investment at a much lower relative price), the fundamentals of the company deteriorate, or you simply need the cash. These are reasons to sell. Warren Buffet says that if you think the company is going to be around in 20 years, buy and hold it.
Finding great companies and building portfolios to suit a client’s individual situation is what we have done for over 60 years. Our portfolios have prospered and weathered through all business cycles because of our focus on buying high-quality investments at smart prices for our clients.
Please feel free to contact me if you would like to discuss what we are investing in right now and what investments make sense for your financial objectives.
JGibson@HighTowerAdvisors.com | 256.213.1150
HighTower Twickenham is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.
All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.
This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.