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Eddie Herring  

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  • Dividend Growth Investors - Mind Your Own Business [View article]
    Chump

    Good to hear from you and you have asked a great question. In my opinion it's a much more difficult issue determining when to sell than when to buy. And one can most definitely get too attached to an investment.

    I personally think some of the question has to be answered by the individual investor's personal goals and perspective. In my opinion on the surface there is nothing wrong with selling an extremely over-valued position.

    Of course that leads to the dilemma of replacing it with another business that is just as valuable. That's not always easy to do either. And sometimes you may have identified a better business and you need to sell in order to raise funds for buying it.

    Where I think we have to be careful is what Peter Lynch described as cutting the flowers and watering the weeds; in other words we hang on to our under-performers and sell our over-performers.

    In regard to Coke I'm reminded of Robert Woodruff, a longtime Chairman and CEO who worked with Coke on up in to his 90's and is the one who actually convinced the board to hire Roberto Goizueta. He owned a lot of shares and was asked one time when was a good time to sell shares of Coke. He replied, "I don't know, I've never sold any."

    I wouldn't go solely by the P/E on whether the company was over-valued but would look at the intrinsic value as well and to what it means to my individual portfolio. P/E's can get out of whack for different reasons.

    And let's also consider that it's possible for P/E's to come back in to line without the price declining, at least significantly, if earnings grow faster than the market recognizes the value and price grows slower than the EPS. In other words the market could be trading sideways while earnings of a particular company are increasing so the P/E drops and before you realize it the P/E reflects a fair value. If you had sold would you be happy? Maybe, maybe not.

    I've been aggravated before when I sold a position I thought was over-valued only to see it continue to climb. Those things happen though in an investment lifetime and you have to take them as part of the learning process.

    I guess I would describe myself as a hesitant seller if I think I have a quality company but there have been times when I sold quickly because I lost faith in the business.

    I guess my answer to your question concerning getting too attached is that at the end of the day you have to take a hard look at the business itself and make a decision if it's still a keeper. Don't go by just the stock price or P/E but look at your long term goals and the intrinsic value of the business and then make a rational decision. And whether it's to sell or to keep, once you pull the trigger on the decision, don't second guess it, just move on.

    Anyway thanks for a great question and I hope I didn't muddy the water too much with a rambling response. Take care,

    Eddie
    Aug 11, 2014. 10:28 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    by4y

    Thanks. Sorry you didn't like the example of using KO but I just felt like it fit well with what I was trying to say. Even quality companies have issues at times so you continue to mind them.

    In all honesty I don't care for KO's equity compensation plan but unfortunately, executive compensation, in my opinion, is an issue all across the country with many publicly owned companies. Makes our role as investors all the more difficult.

    And don't even get me started on golden parachute severance packages for CEO's who have utterly failed in their jobs and run companies in to the ground. I better drop that before I get on my soapbox.

    Anyway, thanks for reading and commenting. Best wishes for your investments,

    Eddie
    Aug 11, 2014. 07:40 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    granger

    Thanks, I appreciate it.

    Eddie
    Aug 11, 2014. 07:20 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    jbushman92

    Thanks for the book suggestion. I'll have to add it to my reading list. And thanks for reading and commenting on the article.

    Eddie
    Aug 11, 2014. 07:20 PM | 1 Like Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Paul

    Yes, that was a surprise. When I saw it my first thought was, "well, that should make my position in KMI an even better investment." Time will tell of course.

    Eddie
    Aug 11, 2014. 07:18 PM | 1 Like Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Jon

    Thanks, glad you enjoyed the article.

    Eddie
    Aug 11, 2014. 07:16 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Moderation

    Nothing wrong with a touch of contrarian thinking. I reserve a portion of my portfolio for investments that aren't considered DGI. That includes closed end funds, options, and non-dgi stocks.

    Thanks for reading and commenting.

    Eddie
    Aug 11, 2014. 07:14 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Sleuth

    Thanks, I hope it helps. I appreciate you reading and commenting.

    Eddie
    Aug 10, 2014. 04:00 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Mike

    Thanks. I remember my Dad used to say to my siblings and me, whenever we got a little extra spending money, that it was "burning a hole in our pockets."

    It's taken me a long time to get there but I've finally gotten to the point, at least I hope I have, where having the cash in my pocket (metaphorically) doesn't have to be spent right then. Especially in my investment accounts where I try to wait for the companies I want to own (or own more of) to come to me with their price. It's not always easy but it certainly pays dividends. :)

    Thanks again, and best wishes with your investments.

    Eddie
    Aug 10, 2014. 03:58 PM | 3 Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    rn

    Thank you for reading. Appreciate it.

    Eddie
    Aug 9, 2014. 11:41 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Obi Wan K

    Nicely put summary. Thanks for reading and providing feedback.

    Eddie
    Aug 9, 2014. 11:40 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    miss

    You are absolutely right, there is a lot of noise in the market. Tuning in to the business performance can help reduce a lot of the static interference. Glad you enjoyed the article and thanks for reading and commenting.

    Eddie
    Aug 9, 2014. 06:52 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    DJ

    You're right, writing down the basis for your decisions is a good thing. It helps you re-focus on the rational basis for the decision and not the emotional basis that may lead to another decision, one likely to be poor.

    Glad you like the article, thanks for reading and commenting. Best of luck,

    Eddie
    Aug 9, 2014. 05:15 PM | 1 Like Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Craig

    Thanks, I'm glad it resonated with you. Managing our emotions is critical to long term success in our investments. Look at WAG recently. How many people reacted to the news negatively based on stock price movement rather than asking is this still a fundamentally strong company?

    If we think of it as a business then the question should be is this a good business. I think it is so I'm staying long. But that's just me.

    Hope your investments treat you well. Thanks for reading and commenting.

    Eddie
    Aug 9, 2014. 03:33 PM | Likes Like |Link to Comment
  • Dividend Growth Investors - Mind Your Own Business [View article]
    Blue Sky

    Patience is not only a virtue in investing, it's a required virtue. Without it, we're in trouble from the get go. Combine quality and patience together though and you've got a pretty strong mixture, IMO. Thanks for reading and commenting.

    Eddie
    Aug 9, 2014. 11:54 AM | 1 Like Like |Link to Comment
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