Buy and Hold - when to stop holding?

[navyasw02]

Interested to see what people's threshold is for a loss. MAT is down 20%, trying to justify holding.

[DividendDragon]

I consider these factors as ones that would push me to sell.

i) Dividend cut
ii) Financial misconduct with company figures - Something like what happened to ARCP
iii) A swelling payout ratio (MAT is 104%, nowhere near sustainable)
iv) A collapsing earnings per share and continuously falling sales.

Many on the forum here are a lot wiser than me and will probably offer better advice. How long have you held MAT for? It would not be a buy on my radar - for the payout ratio alone before looking in depth at other factors.

As for selling that's your choice, it's more or less on it's 12month low by the looks of things. If you fancy seeing resistance levels e.t.c check

http://www.4-traders.com/MATTEL-INC-13462/

You're not alone by the way, GAZP with me is down 40% (a stupid buy from when I knew nothing). What keeps me from selling is that I can wait 40years for a return.

Hope this helps
Lewys

[daat99]

I think Lewys made a good point.
I consider selling only when the dividend was cut/suspended myself and the reason for that is that I have a very long time horizon for the holdings.
As long as they give me my salary (dividends) on time and without a pay-cut than I'm perfectly happy letting the money I sent to work there continue to do so.

Unlike Lewys I don't pay attention to financial figures or payout ratio once I purchased the stock (I do look at them before I make a purchase though).

The reason behind my decision is that those issues can be fixed over time and the company can still recover.

I do realize that if they won't get fixed and won't recover than my loses on that particular purchase will be higher.

This is why I plan to eventually hold a portfolio of over 50 companies which can offset the misbehaving ones.

[rapidacid]

I'd combine the previous two answers and make them my own. Super valid stuff.

“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” – Warren Buffett

http://awealthofcommonsense.com/warren-b...st-losses/

[EricL]

I don't have any hard set sale rules, but generally if a company freezes its dividend or has a change in business outlook from when I bought it I consider selling.

MAT has frozen its dividend and had a rating cut from S&P. Its payout ratio appears unsustainable and it has struggled mightily in a changing landscape for children's toys.

By no means am I telling you what to do, but I sold it for a loss a couple months ago. They could figure things out and turn it around, but I was to the point of investing on hope rather than fundamentals, and that's not something I like to do.

[Kerim]

Completely agree with the previous posts, but will add a few thoughts.

I think a lot of DG-ers have various rules in place for selling that attempt to capture, more or less, the idea of whether circumstances have changed in a way that make the stock no longer a quality DG stock. The obvious example is if the dividend is suspended or reduced.

It is a lot harder when the dividend is still intact, but the company is otherwise faltering. At that point, you have to evaluate whether the thesis for owning the company is still intact. In my mind, when you are talking about, say, a MCD or JNJ -- companies that are proven performers that generate lots of cash -- those occasional years-long bouts of under-performance are a blessing. That is when you get rich. MCD is getting tons of negative press right now, and it earnings are off, and Chipotle, and blah blah blah. But MCD is incredibly sound, and there is nothing broken about it. When the price was at $90 or below recently, it was a gift.

I've never studied MAT, so can't answer whether it is truly broken, or if this is one of those spells that even excellent companies go through now and again. My hunch is that it is not in the same class as the best-of-breed stocks, but I'd want to understand much better if there is a specific reason for the earnings collapse and falling sales. Is it a cyclical business? Are they sufficiently diversified? What is management saying? What is the plan? Has this happened before to the company?

Please keep us posted about what you discover and what you decide!

[DividendGarden]

(03-18-2015, 08:43 AM)Kerim Wrote: I think a lot of DG-ers have various rules in place for selling that attempt to capture, more or less, the idea of whether circumstances have changed in a way that make the stock no longer a quality DG stock. The obvious example is if the dividend is suspended or reduced.

I agree with Kerim. Most DGI's have rules for their holdings, but not all of your holdings may be necessarily for dividend growth. I've held Visa for a long time, and though the dividend growth is great, at a sub-1% yield, I don't own Visa for dividend growth. Make sure you know why you hold it, and if the circumstances change, try not to be emotional about it.

[800peace]

I sell when there's a dividend reduction. Also, sometimes I sell losers for tax purposes.