Growth share dilemma!

[phatmike]

I’m keen on starting a portfolio of growth stocks and holding them for the long term (more than a year). I’m not quite clear on when to exit. My current idea is to exit when either of the following happens:

PEG rises above 1.2
Latest quarter’s profits have increased less than 15% since the same quarter last year.
Latest quarter’s turnover has increased less than 15% since the same quarter last year.
Directors are selling shares and share price is falling as a consequence.
The company isn’t meeting analyst expectations

I’ve decided to put this to the test and I face the following dilemma I hope you can help:

I have the following ticker in my portfolio (BGC) (an american company). Yesterday they announced great profits & turnover way above 20% since the same qtr last year, however it didn’t quite meet analyst expectations and as a result dropped almost 10%! My dilemma is does this present a good buy opportunity because the price has dropped and profits & turnover are good or does this count as a time to exit because the company isn’t meeting expectations?

What are your thoughts?

Thank you for your help

Mike

 

[damianoakley]

Hi Mike,

Despite the fundamentals of this company being strong, yesterday's price movement was VERY eratic.

If you are thinking about buying this stock, I would suggest you wait for some evidence of upward movement. The price closed at the bottom of its trading range yesterday which could suggest further downward movement.

Thanks

Damian.

 

[phatmike]

Well, Say I was already in the trade. Should I have got out? Or is it likely that the share price will rise due to the solid foundations of the company?

 

[damianoakley]

Well, Say I was already in the trade. Should I have got out? Or is it likely that the share price will rise due to the solid foundations of the company?

Should you get out?

That would depend on where you got in.

Are you losing on this trade? If so, by how much?

If you don't mind me saying, I think you may be focusing too much on trying to predict the future. I cannot say whether the share price is likely to rise due to solid foundations. I've seens stocks with seemingly solid foundations crumble into nothing.

In trading and investing, once you are in a position, the market will do what it likes despite your best analysis of what the market is likely to do. The best you can do in trading is to cut your losses as short as possible and to run your winners to the maximum. To do this effectively, you have to devise an entry and exit plan based on what you believe makes sense.

Assuming you were actually trading this stock, I can't say whether you should exit this position or not because it would depend on wether you are a short-term trader or a long-term investor.

My inclination would be to get out of this position because there are better performing shares you could be trading in that haven't had this massive dip in price, but that's just me - that suits my method.

Remember - trading is not an exact science with fixed rules that always work. The best a professional trader can do is to make his best judgement based on what he considers to be sound principles that will give him the best chance to make a low-risk high-reward trade.


Good Luck

Damian

 

[Hook Shot]

Mike I share the views of Damian..........I would add as I do every time these things come up - give the money to someone to manage so you're teething trouble which you will occasionally encounter don't cost you needless amounts of cash. No... I'm not talking about an individual but there are some very smart fund managers running investment companies which find it very hard to lose money. There are one or two investment trusts which come to mind ......... send private message if interested - Its the sort of thing I wish I knew years ago but ............

So, in short, you could split the portfolio between these professionals and you own stock picks..... if you wish
Hook Shot

 

[phatmike]

The thing is, i want to stock pick myself. I work in fund analysis and have no problem picking funds etc.

My conclusion about BCG is that I would sell them. A five star analyst has decided to down grade their eps forcast to below concensus (this normally is a sign that share price could be going further south). Replacing it with JCP sales are above expectations and a five star analyst has recently anounced an upgrade in his forcast which is above concensus. Fundamentals are good, peg is low, price/sales ratio is low. Good rel strength good forcasts, good working capital, etc, above 200 sma.

 

[Hook Shot]

Sorry mike!!!
All the best

 

[phatmike]

Sorry didn't mean to sound rude, thank you for your offer. Hook shot, How do you trade?

 

[catracho]

The thing is, i want to stock pick myself. I work in fund analysis and have no problem picking funds etc.

My conclusion about BCG is that I would sell them. A five star analyst has decided to down grade their eps forcast to below concensus (this normally is a sign that share price could be going further south). Replacing it with JCP sales are above expectations and a five star analyst has recently anounced an upgrade in his forcast which is above concensus. Fundamentals are good, peg is low, price/sales ratio is low. Good rel strength good forcasts, good working capital, etc, above 200 sma.

Fundamental analysis is all well and good, but you also have to incorporate good timing into your buys/sells..I have seen a lot of very good "fundamental analysts" produce good reports, but forget that the market is always pricing in future news, so a good look at the price behaviour is necessary to go with the fundamental view! ie technical analysis..

 

[phatmike]

I'm fairly new to fundamental investing. Previously i've spent a lot of time looking at pretty much every technical indicator under the sun and still can't find a tradable system and don't know of many who have. I would like to use some technical aspect for timing.

Got any sugestions (bearing i'm wanting to hold stocks for more than a year)?