How to identify the time to sell a stock

I have received a comment from A Friend under my previous post here to know the selling time of a stock that an investor have. I thought it would be nice to discuss the same for readers to have better awareness about the time to sell a stock or share.

In my previous post, I have discussed about opportunities to buy stocks. It also explained how macro economic factors influencing a stock market and offering great opportunities to an investor to buy great stocks with relatively small prices. In the same article, I have also informed any investor about his/her required approach to the macro as well as micro factors.

If you are an investor, then this is the very basic but most important point to keep in mind. Any changes through macro factors like, industry slowdown, individual calamity, economic recessions, are your best friends by offering great time to buy great business in relatively low prices. In the same time, any deep, on going changes with micro economics, especially the economics of the company, is your red alert to sell the shares.

There are some major points, an investor always need to keep in mind regarding the timing of sell shares:

1. If you are holding any stock or business and found that is a laggard for long term an no ability to generate earnings that you expected, it is better to sell of the same to reduce more money losing risks. My previous article pointing out the important areas on a company that an investor should consider before buying any stocks. This could be helpful to avoid such situations.

2. In the other hand, if you are holding a business which growing amazingly in the market and sense of earnings, there is no downside risk and the economics of the company is fantastic, then the period of holding this stock is ‘forever’. There is no word of selling such stocks.

3. With Benjamin Graham approach, an investor seriously considering to sell a stock when it turns to fully priced or exceeding its intrinsic value. Here is a classic article to determine the value and price deference of a stock to buy.

4. With the approach of Philip fisher, and I considering this is the best one, along with Charlie Munger, the long time partner of Warren Buffet, sharing the best idea on the time of selling a stock. Any major changes to the company micro economics that affecting to the future growth of business and highly reflecting to the negative earnings, is giving a situation to an investor to be alerted with a selling trigger.

It is very difficult for an ordinary investor to identify the right time to sell his/her shares because of the impossibility of predicting the future market timing or behaviour. As a value investor, one should be always focused to get time to time information’s on the business were he invested, to understand the major changes happening to the company and its economics, to take proper selling decisions.

Welcome your thoughts. As this is a most important part of investing, any thoughts that lead to a good clue will be highly appreciated.