Hi guys, do you hold onto stocks that once you bought they become overvalued along the way, I don’t mean highly overvalued tech stocks but any other stock even the consumer staples, slightly or mildly overvalued compared to their fair price. Do you still hold them for the long term?
I noticed that some or mostly of the DJIA are also overvalued and they stay there almost forever so I believe I have the answer already, just I want to know your opinions as well…as investors, long time investors…
Do you not have to ask yourself - is it logical to continue to hold a share, where in your own view is overvalued? In your value assessment, you may potentially have accounted for market share, future market size and so on, so in that case it wouldn’t make any sense to hold.
Uhm… let’s say I base my evaluation of each company on P/E ratio, P/B ratio, PEG, EPS and earnings growth in the past 5-10 years, moat. Then I check some different analysts fair value for the stock price, so I take all into consideration and decide to buy, hold or eventually sell. However sometimes I have Amletic doubts whether to sell as I mentioned, for example for companies that sound good for EPS, moat and sometimes even the P/E ratio(I like it to be below 20 but I also compare to the peers and to the industry) but having a fair price as indicated by the analysts that is higher than the actual price. That’s where I don’t know if I shall sell or keep… I started investing few months ago that is the reason why sometimes I am unclear on some things… another example… do analysts change the fair value moving forward or they will keep the same value for years, that I don’t understand… so if I buy a company whose target price is 200 USD but the cost now is 220 USD however every single ratio is sound and the company is well poised in the market… Why shall I sell? Am I right to buy and hold on that company?
I guess one questions is what kind of stock it is and what you are trying to get out of your portfolio.
So if your looking for growth, and this stock has grown 50% and you think it is now overvalued, will it continue to grow whilst being ‘overvalued’ like some of the tech stocks, or do you think it will correct. If you have a better growth opportunity elsewhere then sell some/all and move into that.
If the stock pays a good dividend (not usual in growth stocks) or if its dividend growth is good then you may want to hold some/all if looking to tranistion from growth into dividend income.
Thank you. Mostly I own dividend and conservative stocks, just a couple of growth stocks to make it a more diversified portfolio. I had growth stocks, I sold them after a 30-40% profit to see them going up to a 200% (for example zoom) since I sold them, but also other stocks going up and down like my bloody pressure so I prefer to stick to one strategy which is the more conservative way based on fundamentals and sleep better at night.