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Our club purchased 40 shares 9-29-08 @ 43.92 and then 60 shares 11-25-09 @18.56. Friday's 10-9-09 close = 39.51, which is more than double the value of the 60 shares. Cost averaging the 2 purchases = 28.84.
My question as the nervous manager for CAM: Is it advisable to sell off some to benefit from a profit now, while the going is good; OR would you hold all shares with the optimistic view that the cost average price will double? Since the market has been so unpredictable and profits seem to be sliding for CAM even though the price continues to climb, do we still wait it out patiently for 4 more years per NAIC philosophy? What is the general thinking on a situation like this and why?
Take Stock ranks CAM 3.2 for the Quality Index and the Mood Indicator is Cool. Fundamentals don't justify a purchase at this time.
Thanks in advance for any light that can be shed on this.
Janet Ralston
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Rank: Advanced Member
Posts: 71
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Janet,
I think that you have a misunderstanding of the "NAIC philosophy." The notion is that you'd like to aim for your portfolio to grow by 15% annually, and that will result in a doubling of your portfolio's value (assuming no additions) in 5 year.
There is no requirement or suggestion that you should hold stocks for five years. Instead, the notion is that good companies should be held for long-term appreciation. But, you should also monitor your holdings to correct problems -- sell poor performers -- when that become apparent.
So, the real question has nothing to do with what CAM has done in the past, but what it's likely do do in the future. You should update your stock study and make that judgement. And, remember ... if you decide to sell CAM, you'll need to replace it with a company that has better potential for future growth.
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Thanks for your response, I am assuming that you are saying to sell all or none.
We definitely get "hung up" on the 5 year hold, as a club. We are buying stocks on a regular basis, just acquired 2 more last meeting, which might be considered 'better potential for future growth.' We have a past record of buying more than we sell, which I think is a common problem, but after a stint in the Repair Kit of BI Magazine, we managed to get rid of some losers finally.
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Rank: Advanced Member
Posts: 71
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I wasn't advocating selling or keeping. I was just commenting on the "hold for 5 years" comment.
If your club is buying quality stocks, you'll keep many more than you sell. I don't see that as a problem at all.
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