When to sell

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12. Profit warnings

Regardless of what other rules you follow, always consider selling immediately when a growth company issues a severe profit warning, unless it truly qualifies as a core holding.

You will typically suffer a loss, or a reduction in profits, of 20-50%. But there is rarely anything to be gained by hanging on. Most companies in this position either cannot bring themselves to tell all the bad news at once, or are not yet aware themselves how much there is to tell. As the saying goes, there is rarely just one cockroach in the kitchen. One profit warning is frequently followed by another, or even several others.

This process can lop anything from 30-90% off the price of a highly rated stock. It may then take years for investors to regain confidence in the company.

1. When should you sell? 2. What is your overall strategy? 3. Selling for passive investors 4. When to take profits as a value investor 5. When to take losses as a value investor 6. Selling for growth investors 7. Mechanical formulas for selling 8. Selling in order to reinvest 9. Stoplosses 10. The argument over stoplosses 11. Limitations of stoplosses 12. Profit warnings 13. Selling for traders 14. William O'Neil's trading system 15. The most important rule of all 16. Emotional problems 17. Conclusion