Escape the Ghosts of Lifeless Stocks
This column was originally published on RealMoney on Nov. 11 at 10:40 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
Fascinations with stocks from the past continue to plague those of us who like to think of the future. This week I met with investors who owned, respectively, Dell (DELL), Cisco (CSCO), Sun Micro (SUNW) and Oracle (ORCL). In each case I told them to sell the stocks. In each case I said these stocks' best years are behind them. In each case I said that they should move on to find the next Dell, the next Cisco, the next Sun and the next Oracle.
And in each case they thanked me and indicated that they would wait for a better time to sell.
Better time to sell. What does that mean? If you have unlimited capital and you can afford to wait, then sure, that's a good response. If you are a fund manager and they are minor positions that you keep on to monitor, then I get it too.But in every case I am aware of, none of these is the situation. In each case, capital is being tied up in a futile attempt to get back to even, or because of fear that the stocks will ramp the moment you sell them. I can't tell people ultimately what these stocks will do. I do know that there are so many stocks that are better that it makes no sense to hold them. I keep 25 stocks for the ActionAlerts PLUS portfolio. No more than that, and I can keep a lot of stocks in my head. If you simply adopt the discipline that you can buy no new stock without peeling one off, I think it would help you if you are stuck in this situation. More important -- I think it is important -- if you are in one of these situations, to recall that you can always buy back the stock if you think something has changed. In the interim, it is time to find and embrace the future, not the past.
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