The Market Is Advancing: Is It Time To Sell?

Includes: CA, CSX, NSC, SPLS, SWY, WBA, WU
by: David Crosetti


With the stock market making "all-time highs" lately, it seems that there have been more articles written about "selling strategies" than ever before. Two articles that I have really enjoyed were written by Eli Inkrot who asks the question: "Walgreen: Should I Stay Or Should I Go Now?" and another written by Larry Smith: "5 Reasons We Stink As Investors."

Eli shares his story about having bought Walgreen (WAG), at $30.26 a share in July of 2012 and as of March 13th, 2013 the stock price has gone to $42.78 a gain of 44% in eight months. Now some of you might be saying, "I wish I had that problem."

Larry, in his article, tells us that we fail as investors because:

  1. We follow the herd
  2. We trade to much
  3. We are not diversified
  4. We dismiss the power of dividends
  5. We lack discipline

He goes on to explain each of his reasons with great detail.

What You Should Know:

Every investor needs to have an objective. I may sound like a broken record here, but you should not be investing in anything unless you have an end-game in sight. Why are you investing in the stock market (or any other investment field), what do you hope to accomplish by investing in the stock market, and what will be your attack plan to achieve your objectives?

For some people, growing their net worth is the main objective. I guess you can say that these investors would be the classic "buy low, sell high" investors. For others, it is to create an income stream that grows every year in order to fund their retirement years. Some have a combination of both growth and income as their objective.

Knowing your own particular objective is critical to your decision making as to when to buy and when to sell. There really is no right or wrong answer here. For some people, getting a 44% gain in a particular holding in less than 12 months is a trigger to sell and lock in the profit. For others, that gain might trigger a rebalancing of their holdings to bring that explosive growth holding back in line with the rest of their portfolio, and still for others, the growth might be a signal to add additional shares of the stock and enjoy a readjusted cost basis while maintaining a positive gain in the holding.

Your reasons are as personal and individual as you are. I can't tell you that you should or should not be selling, holding or adding to your position and neither should anyone else. I can tell you, though, that if you do not have a clearly defined objective for your investment portfolio, you will do nothing but agonize over what you should do with your holdings and when you should do it.

What I Know:

I am primarily a Dividend Growth Investor. I choose companies to add to my portfolio that:

  1. Are priced at a value to their intrinsic worth (I love a sale)
  2. Have a history of increasing dividends on an annual basis
  3. Are increasing dividends at a rate larger than inflation
  4. That have the capability of continuing dividend increases

As simple as those metrics are, I tend not to be a seller unless:

  1. The dividend is cut, suspended, or eliminated
  2. Something changes within the fundamentals of the company
  3. I need to rebalance my holdings

Some Recent Examples:

I have posted a series of articles about "The Portfolio For Do It Yourselfers." This is a portfolio that my children and I have been managing since 2006. It is a DG portfolio, for all intents and purposes and recently we added five holdings to our basket of stocks.

In November of 2012 we bought positions in CA Technology (NASDAQ:CA); CSX Corp (NYSE:CSX), Safeway (NYSE:SWY), Staples (NASDAQ:SPLS), and Western Union (NYSE:WU).

Now, we purchased these companies because we felt that they were undervalued relative to their intrinsic value. The dividends they paid were important, but the value at the time of purchase was the determining factor for our investment. In January, we added Norfolk Southern (NYSE:NSC) to the portfolio.

At the close of market on March 14th our investments looked like this:

Every one of our companies has had a rapid increase in price and Safeway has had the largest increase in value, up almost 48%.

So, in looking at the results for the 5 recent purchases, what would you do? I am sure the answers would be as diverse as the diversity in investment strategies that are out there. For us, we are holding. In our view, each of these companies are still valued well, pay a dividend, have been increasing those dividends, and should continue to increase those dividends moving forward.

As a DG investor, the primary goal for me is to created an income stream that allows me to continue to invest with money being derived from our stock ownership. For you, the objective may be different. Do I like the growth in the value of these six holdings? Absolutely! Would I consider adding to any of these positions? Again, absolutely.


Every investor needs to decide for himself when and why to sell a particular stock. I've always held that if it's not broken, don't fix it. Will these companies go higher? I don't know. Will they go lower? Again, I don't know.

Buying for the long term has served me well over the years.

Disclosure: I am long CA, CSX, SWY, SPLS, NSC, WU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.