A Guide on How to Find Undervalued Stocks 

Are you looking to supercharge your investment portfolio? In the ever-evolving world of finance, finding undervalued stocks can be your ticket to potential wealth and financial security. But how do you identify these hidden gems in the vast stock market? 

In this guide, we’re going to dive deep into the art of discovering undervalued stocks that have the potential to yield substantial returns. Whether you’re an income-seeking investor eyeing undervalued dividend stocks, a tech enthusiast interested in undervalued tech stocks, or someone with an appetite for growth stocks, we’ve got you covered. 

But how do you spot those hidden gems in a stock market containing over 7,000 possibilities? It takes knowing what to look for – the right metrics, indicators, and overall characteristics. Whether you’re an income investor, growth investor, trader, or speculator – finding and investing in undervalued stocks aligns with most investing philosophies. The logic is simple – buy low, sell high. When you purchase quality stocks trading at a discount, your margin for profit substantially rises.

By the end of this guide, you’ll have the knowledge and tools to identify undervalued stocks that align with your investment goals. Whether you’re a seasoned investor or just starting, this guide will equip you to make informed decisions in the world of undervalued stocks. Read on to discover your next financial opportunity. 

What are Undervalued Stocks?

Undervalued stocks are stocks trading below their inherent worth or true value. But estimating a stock’s intrinsic value involves looking beyond its current market price. By using valuation metrics, financial modeling, and qualitative assessments, investors determine when the market misprices a stock relative to its potential.

The market regularly misvalues stocks by either overvaluing or undervaluing them. This disconnect between price and value stems from economic conditions, investor sentiment, and company specifics.

Economy-wide or sector-specific downturns indiscriminately pressure stock prices down across industries. Near-term operating headwinds or weak quarterly results can also sink stocks regardless of long-term prospects.

Additionally, negative market psychology and prevailing pessimism frequently drag stocks below fair value. The key is blocking out noise and objectively assessing a business’s fundamental health.

Investors favor underpriced stocks because it provides a margin of safety. The gap between price and projected value presents potential upside as undervalued stocks mean revert towards full valuation.

Think of undervalued stocks as companies facing temporary issues, their true long-range trajectories still intact. Identifying and investing in them before the crowd catches on provides huge value creation through future price appreciation.

Valuation Metrics Signaling Undervalued Stocks

As Peter Lynch emphasized – price is what you pay, value is what you get. Finding stocks valued less than what they’re intrinsically worth is the cornerstone of value investing.

Several key valuation metrics demonstrate when stocks trade at bargain prices:

Price-to-Earnings Ratio:
The P/E ratio measures a company’s current share price relative to its earnings per share. A low P/E ratio signals an undervalued stock since investors assign little value relative to profits. Compare P/Es within sectors to find discounted stocks with upside to mean ratios.

Price-to-Book Ratio:
The P/B calculates whether a stock sells for less than its book value or net assets. A P/B below 3.0 signals a potential value stock while ratios under 1.0 indicate deep value. Compare book values over asset values to confirm if fire-sale prices exist.

Price-to-Sales Ratio:
For higher growth early stage companies that reinvest profits into expansion, the P/S ratio substitutes sales for earnings. Compare ratios amongst industry peers to find stocks with solid revenue trading at discounts.

Dividend Yield:
Undervalued dividend stocks feature higher yields than industry averages and historical ranges. Yields signal what income return you receive upfront while awaiting share price increases.

Future Cash Flow Analysis:
Discounted cash flow models estimate intrinsic value based on projected future cash flows. Compare these model prices to current prices to quantify discounts-to-value.

Technical Analysis – Momentum and Trend Reversals

While valuation rankings highlight intrinsically cheap stocks, technical analysis examines price action and trends to confirm upside potential.

Technicians employ stock charts and technical indicators like moving averages to reveal investor psychology and emerging momentum. Upside breakouts, oversold readings that trigger reversals, and upside volume surges provide buy signals on beaten-down stocks.

Oversold RSI levels signal capitulation selling exhaustion from which stock rebound as selling pressure recedes. Positive divergences with price carving higher lows while indicators like RSI or On-Balance Volume trend higher hints upside coming.

Technicians also analyze previous support levels and trendlines where stocks find buying interest to re-enter. Combining discounted valuations with constructive chart patterns and indicators gives higher conviction around upside.

Qualitative Analysis – Beyond The Numbers

Even attractively priced stocks need proper qualitative vetting to ensure their businesses remain healthy. Analyze softer aspects like:

Industry Trends:
Favorable secular shifts provide tailwinds regardless of economic cycles. Disruptive innovation and new high growth markets often mask temporary business challenges.

Management Quality:
Study executive backgrounds, performance incentives, capital allocation plans, and past navigations of crises. Skilled leaders offset risks especially on battered stocks.

Competitive Advantages:
Analyze what differentiation prevents customer losses and erosion from rivals. Network effects, intellectual property, scale cost advantages and brand equity strengthen leading positions.

Growth Drivers:
Robust pipelines, new product launches, expansion possibilities and M&A opportunities indicate upside not quantified in current earnings.

Types of Undervalued Stocks

While all stocks can trade below fair values, certain categories routinely present coiled springs.

Undervalued Dividend Stocks:
Mature low-volatility companies often face skepticism despite consistent dividends and buybacks. Compare payout ratios and yields to reveal mispriced income stocks.

Undervalued Tech Stocks:
Rapid innovation leaves many tech companies misunderstood and their disruptive threats underestimated. When growth hits temporary snags, investors quickly extrapolate doomsday scenarios.

Undervalued Growth Stocks:
Growth favorites correction 50% or more during economic and liquidity shifts as prosperous long-term outlooks get ignored in panic selling.

Strategies to Find the Most Undervalued Stocks Now

Finding even one undervalued stock with upside can transform portfolio returns. But several proven strategies efficiently uncover today’s biggest disconnects between price and potential.

Deep Value Investing: Iconic investors like Warren Buffett target extreme discounts to book value, earnings power and cash flow generation. Deep value investing works best buying companies with staying power over market dips.

Contrarian Investing: Buying out-of-favor, unloved stocks that short sellers target demands resolve but reaps huge rewards. The best opportunities surface when stocks face industry upheaval or company uncertainty despite solid cores.

Growth at a Reasonable Price: Find quality growth companies hitting air pockets from temporary setbacks not deterioration. Seeking growth stalwarts trading at discounts to historical multiples provides upside with less downside.

Screening Tools and Stock Scanners: Input valuation metrics, fundamentals criteria and technical filters into screeners to generate stock idea lists objectively matching deep value criteria. Scan within industries and market caps for mispricings relative to comparable groups.

Risks When Investing in Undervalued Stocks

While undervalued stocks present significant upside potential, they also carry increased risks in some cases. Here are the major hazards when targeting deeply discounted stocks:

Financial Distress Risk – Some cheap stocks are outright value traps en route to bankruptcy and liquidation. Analyze debt levels, cash burn rates, credit ratings and avenues to raise capital to avoid terminal value declines.

Lack of Catalysts – Certain stocks trade at low valuations indefinitely without catalysts to unlock value. Change often needs to come externally through management changes, activist investors, private equity interest or strategic mergers.

Opportunity Cost – Capital gets tied up in stocks other assets outperform during extended downturns. Consider position sizing each undervalued stock to limit opportunity costs.

Emotional Risk – Buying stocks amidst bad news and continuing price declines tests conviction. Volatility may heighten before gains accrue.

While higher risk, historically the excess returns justify bargain hunting during fearful periods provided you stick to quality stocks.

The key lies in fundamental analysis separating temporary problems from permanent ones when identifying mispriced companies to mitigate risks associated with undervalued stocks.

DISCLAIMER: Undervalued, emerging growth stocks may represent a greater risk to the investor. This guide is for informational purposes only and does not constitute investment advice. Any investment decisions should be made with a licensed investment advisor.

Resources like Channelchek provide equity research from numerous Wall Street analysts to uncover consensus undervalued opportunities from across coverage universes and sectors.

Finding undervalued stocks stacks odds dramatically in your favor to reap life-changing wealth. But calculated approaches win over blind stock picking while circumventing value traps. Follow the playbooks of legendary investors who built fortunes identifying future blue chips trading at bargain prices at the time.

Arm yourself with the metrics, models, resources and strategies outlined to pinpoint the market’s mispriced stocks today. Consistently applying a framework for finding, researching and buying undervalued stocks builds a dividend machine primed to deliver outsized returns as investments revert to true values.

The journey begins by creating your free Channelchek account to tap into institutional-grade equity research and screeners identifying discounted opportunities across global markets.

What is Equity Research? Tips for Making Informed Investment Decisions

No matter if you are just starting your investing journey or a seasoned professional, making a sound investment decision is always complex. However, one crucial aspect that can separate successful investors from the rest is equity research.

But, what exactly is equity research, and why is it so vital in the world of investing?

Today, we are going to dive deep into this topic to help you understand how equity research can be leveraged to make more informed investment decisions. By shedding light on this intricate process and providing valuable insights from free equity research reports, you can arm yourself with actionable tips and tools to become a smarter investor.

Understanding Equity Research

Equity research is the detailed analysis and evaluation of companies and their equity securities like common and preferred stocks. The core goal is to develop an informed, unbiased opinion on the financial valuation and future prospects of a public company along with its shares. Equity researchers, often referred to as equity analysts, conduct rigorous financial modeling, ratio analysis and due diligence research to provide actionable investment recommendations and targets.

These comprehensive equity research reports become invaluable resources that help all classes of investors make prudent decisions on which stocks to buy, hold or sell. The reports provide a holistic perspective of a company’s financial health, operations, industry dynamics, and management team. By reviewing equity research reports, investors can better assess the inherent risks and growth opportunities of a potential investment.

For example, research reports incorporate detailed financial projections, valuation models, and investment theses that indicate whether a stock may be undervalued or overpriced. Having access to high-quality equity research from Wall Street analysts can provide individual investors with a distinct edge when selecting stocks to build their portfolios.

What are the different types of equities?

Common Stock – This represents ownership in a company. Common stockholders typically get voting rights and a claim on dividends and corporate earnings after other stakeholders are paid.

Preferred Stock – This represents partial ownership in a company. Preferred shareholders have priority over common stockholders when it comes to claims on assets and earnings. They typically receive regular dividend payments before common shareholders. However, preferred stock usually does not come with voting rights.

Blue Chip Stocks – These are stocks of large, reputable companies with a long history of sound financials and steady dividends. Blue chip stocks are generally considered lower risk. Examples include companies like Johnson & Johnson, Procter & Gamble, and Coca-Cola.

Growth Stocks – These are stocks of companies expected to grow at an above-average rate compared to the broader market. Typical growth stocks trade at higher valuations and reinvest profits into expansion rather than pay dividends. Examples include tech companies like Alphabet, Facebook, and Netflix.

Income Stocks – These stocks regularly pay out higher than average dividends to shareholders. They are ideal for investors seeking regular income. Traditional income stocks include utilities, real estate stocks, and consumer staples companies.

Penny Stocks These are inexpensive stocks that trade for under $5 per share. Penny stocks are generally more volatile and risky since they belong to smaller companies.

Now you may be wondering, who actually conducts all this intensive equity research that gets distilled into reports? Equity research is primarily conducted by financial analysts employed by investment banks, wealth management firms, hedge funds, pension funds, and other institutional investors. These analysts possess deep financial acumen and industry expertise that allows them to build complex financial models and derive reliable stock valuations for public companies.

Top firms like Goldman Sachs, Morgan Stanley and Noble Capital Markets have entire teams of equity analysts covering different sectors, industries, and regions. The lead analyst generally focuses on and specializes in a specific industry they have experience in. For instance, some analysts may focus on just healthcare stocks or technology companies. These specialists leverage their knowledge to provide invaluable insights and analysis.

Why is Equity Research Essential?

Now that we’ve covered the basics of what equity research encompasses, let’s discuss why it is such an indispensable tool for investors:

Identifying Promising Investment Opportunities 

One of the biggest benefits of equity research is it can uncover promising investment opportunities that may be flying under the radar. The due diligence conducted by analysts digs much deeper into a company’s fundamentals to determine if its stock is potentially undervalued relative to its growth prospects. This allows analysts to identify stocks poised for upside that the broader market may be mispricing.

Assessing Downside Risks

While finding hidden gems is great, equity research also evaluates potential downside risks and red flags that may not be apparent to an average investor. This cautionary perspective helps mitigate losses from investments that seem enticing but have underlying issues.

Making Informed Investment Decisions 

Equity research provides a holistic 360-degree perspective of a company that individual investors typically lack. Investors can leverage these comprehensive insights to prudently decide where to deploy their capital and build conviction around investment choices.

Gaining Expert Industry Knowledge

Seasoned equity analysts also provide key insights into industry trends, competitive dynamics, economic cycles and sector outlooks that most retail investors do not possess. Their expertise helps investors make bets in promising high-growth industries primed for secular tailwinds.

Considering these myriad benefits, equity research can aid all types of investors ranging from novice individuals to large institutions. Even professional fund managers at marquee hedge funds and investment banks routinely utilize equity research to inform multi-million dollar investment decisions. Leveraging expert third-party research analysis levels the playing field.

The Equity Research Process

Now that we’ve covered why equity research is so invaluable, let’s explore how analysts actually conduct this complex and meticulous process:

Step 1 – Data Gathering & Financial Analysis

The first step of equity research involves gathering all available data and information on the target company. Analysts will thoroughly study annual reports, SEC filings, earnings calls, conference presentations, industry publications, news articles, economic data, and management commentary to ensure nothing is overlooked.

Next, they dive into analyzing the company’s financial statements and operating metrics using various techniques:

– Building detailed financial models based on historical financials

– Projecting future income statements, balance sheets, and cash flows

– Calculating financial ratios like P/E, EV/EBITDA, PEG, current and quick ratios

– Benchmarking metrics and multiples against peers through comparable company analysis

This rigorous financial analysis focuses on developing an objective understanding of the company’s financial health and performance.

Step 2 – Industry and Competitive Analysis 

Analysts will also conduct in-depth research on the company’s industry, end-markets, competitive landscape and business model. This includes identifying market size, growth trends, industry drivers, pricing dynamics, competitive threats, opportunities, and regulatory issues.

They’ll assess the company’s positioning and advantages versus rivals. The goal is to develop specialized industry expertise and perspective.

Step 3 – Technical Analysis

Equity researchers will analyze the stock’s price patterns, trends, volatility, trading volume and momentum indicators over time to identify optimal entry and exit points. This technical analysis complements the fundamental financial analysis.

Step 4 – Valuation Analysis

Armed with the financial data and industry insights, analysts derive price targets and fair valuation ranges for the stock. Common valuation methodologies include:

– Discounted cash flow (DCF) analysis

– Applying P/E multiples based on industry averages

– Leveraging valuation multiples from past M&A transactions

Each methodology makes certain assumptions that are tested through sensitivity analysis. The end valuations consider both quantitative data and qualitative assessments.

Step 5 – Final Recommendation

Finally, the analyst sums up their buy/sell recommendation and 12-month price target in an equity research report. This final call is based on the upside potential versus downside risks assessed through their rigorous analysis. Top analysts revisit and update their models regularly as new data becomes available.

Tools and Resources for Equity Research

For those looking to leverage equity research, many free resources are available:

Access Free Equity Research Reports

Channelchek is a resource that provide clients with free equity research reports on companies and stocks they cover. New  and seasoned investors should take full advantage of these free resources.  When reviewing equity research, look for reports that exhibit quality and objectivity. Some hallmarks to seek out: impartial analysis not motivated by investment banking relationships, the right balance of quantitative and qualitative insights, data/assumptions from credible sources, and serious financial modeling.

Additonally, resources like Capital IQ allow you to practice modeling, while reading analyst reports from top firms can provide templates to learn from. Investor education sites like Investopedia also have introductory content to develop core competencies.

Register with an account with Channelchek today to get free access to our Equity Research Reports.

Equity research is the fuel that powers informed investing. By properly leveraging analyst insights, both novice and seasoned investors alike can make smarter stock picking decisions. As you embark on your investing journey, be sure to educate yourself on the equity research process and analysis techniques. With quality research in hand, you can invest with conviction and confidence. Check out our free equity research reports to accelerate your investing education today!

How to Use Small Caps to Diversify Your Portfolio

Small cap stocks are an often overlooked opportunity for regular investors. While most focus their attention on big household names like Apple and Microsoft, small caps can provide key benefits to your portfolio. In this article, we’ll look at what makes small cap stocks different, reasons to consider investing in them, and how best to include them in your overall investing strategy.

What are Small Cap Stocks?

Small cap simply refers to small capitalization companies. They have a total market value or capitalization that is relatively small. In the U.S. stock market, small caps are generally defined as companies with a market cap between $300 million to $2 billion. Meanwhile, large cap stocks are the big boys like Walmart with market caps over $10 billion.

The most obvious trait of small caps is that they are younger, newer companies. Think of spunky young upstarts versus mature bluechip firms. Many small caps are still working to find their footing and carve out their niche, whereas large caps dominate established sectors.

This gives small caps more room for rapid growth, but also higher risk. Their smaller size means limited resources, unproven track records, and uncertainty around whether they will achieve scale. Volatility comes with the territory.

But with greater risk can also come greater reward if you pick the right small caps. For investors, this asset class offers plenty of overlooked potential.

So why should investors even bother with small caps? A few good reasons:

Growth Potential

The biggest appeal of small caps is their high growth potential. While large established companies have already reached maturity, small caps are still in their early stages where rapid expansion is possible. Getting in early on promising small cap stocks can lead to massive returns over time.

For example, buying shares of a company like Etsy or Shopify in their early days as small caps could have generated 10x or even 100x returns for patient investors as those companies grew to multi-billion dollar valuations. The chance to identify and own the next Apple or Amazon while their market cap is just a few hundred million dollars is an enormous opportunity.

Of course, investing in any small cap is high risk and many will not succeed. But a diversified portfolio of thoughtfully selected small caps tilted towards sectors with strong tailwinds can unlock tremendous growth. Taking some calculated risks while sticking to sound fundamentals is key.

Diversification

Owning small caps is a great way to diversify a portfolio heavy on mature large cap stocks. Because small caps operate in different niches and have unique risk factors, their stock prices behave differently than large caps. This means including small caps can actually lower overall portfolio risk and volatility.

Small caps also shine at different points of the economic cycle than large caps. When growth is sluggish, investors tend to favor large caps for their stability. But in periods of economic expansion and bull markets, small caps tend to deliver stronger returns. This cyclicality means pairing both provides more balanced exposure across market environments.

And importantly, the returns of small caps have low correlation to large caps. This low correlation is a crucial benefit, since it smooths out portfolio performance over time. For example, when large cap stocks are declining, small caps may be stable or even rising. This illustrates why allocating 20-30% of a portfolio to high-quality small caps can improve overall diversification.

Innovation Appeal

Another major reason to invest in small caps is the innovation factor. Small companies are often pioneers in developing cutting-edge technologies, medicines, software platforms and other game-changing solutions. Unlike large caps, small caps have agility and risk tolerance to focus intensely on bringing new ideas to market.

For example, most breakthrough biotech and pharma firms start out as small caps, racing to get FDA approval for their patented drugs. Software firms disrupting industries also tend to be younger and more nimble. And emerging sectors like green energy and electric vehicles are being driven by upstart small cap companies.

Getting in early with innovative small caps developing disruptive technologies provides exposure to future trends that large caps simply don’t offer. It allows investors to tap into new niches before they become mainstream. And investing alongside visionary founders and entrepreneurs in new fields generates exciting upside.

Of course, betting on unproven technologies and markets comes with risk. But a basket approach of diversifying across several promising small caps in high-potential areas prudently taps into this appeal. Backing innovation via calculated small cap investments generates asymmetric reward versus risk.

Investing Strategies with Small Caps

The most popular approach is investing in small cap mutual funds or ETFs. This provides instant diversification across dozens or hundreds of small cap stocks. Low cost index funds like the Vanguard Small-Cap ETF are a great starting point because they track the overall small cap market at low cost. Actively managed small cap funds aim to outperform by utilizing research and stock picking. Either method offers a simple way to add small cap exposure.

For a more active approach, investors can hand pick individual small cap stocks. This requires rigorous research to identify quality companies within attractive niches that have strong leadership, a durable competitive advantage, and metrics pointing to high growth potential.

Since small caps carry more risk, it’s crucial to diversify and size positions appropriately when buying individual stocks. Use them to complement a core portfolio of sturdy large caps. Blending individual stock picks with a small cap index core allows concentrating assets in your highest conviction ideas. Overweighting small caps beyond 20-30% of your total portfolio exposure adds undue risk.

While small caps demand more research and carry greater risk, they can supercharge portfolio returns. Blending small caps strategically with large caps allows investors to capitalize on this untapped potential while minimizing the downside.

To Sell or Not to Sell (Your Stocks)

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Advice is Plentiful on When to Buy Stocks, But When Should You Sell?

During the fourth quarter of 2022, stocks have climbed dramatically. The Russell 2000 small cap index is up double-digits in percentage, and the S&P 500 is approaching a ten percent increase. This is a welcome run-up over such a short period of time. The sudden move has investors, some of whom still hold paper losses, asking themselves, do I sell now, do I add to my positions, or should I sit tight and wait?

Information on when to buy into a position is abundant. Advice on when to decide your assets are better off elsewhere is much less available. There is just less demand from readers on the topic.

Selling Considerations

First off, one does need to consider their financial plan. Is this money that is needed within the next few months, or can the value of the position or positions change without much impact on future plans? Also, is there a better use for the proceeds? If the position one is holding is still the best use of funds, then the answer, net of any emotions, may be to hold.And emotions can make for bad decisions.

Some investors that were about to pull the trigger on the sale of a position weeks ago when stocks were falling may find their position has regained much of the loss, but now they are back in greedy mode, hoping for more, despite being able to get more.

Let’s take a level-headed look at the factors involved in making the decision regarding selling.

Opportunity Cost

One fundamental question should ask themselves regularly is, do I think the risk-reward of each position and all positions taken together are best for the portfolio? If not, depending on tax consequences, if it’s determined that other opportunities might perform better, then it should be of little concern if the stock is up or down from where it was purchased. In fact, depending on what kind of investor you are, it may make sense to lighten up with the plan to re-evaluate if prices fall again.

One way to get a handle on this is to determine, does the stock underperform in a rising market. Does it fall at a faster pace than the market when the market is falling? The answers to these questions can help identify if the position should be cut loose and may be replaced by a better performer.

Moving Averages

Investors can look to moving averages for a hint as to whether the position might be overbought or oversold. Which moving average you use should be based on the expected holding period and also what works best for the stock you are reviewing. For a seldom traded portfolio with longer-term positions, its common to use a 200-day moving average, but depending on the stock’s past performance, the investor may wish to overlay different averages to guide their thoughts on whether the stock might give back recent gains and fall back in line with past performance.

Time Horizon

Many investors skip the step of determining the expected holding period before a purchase of an investment. This is like leaving for a trip without any directions to get you started. If you didn’t do this before your purchase, do it now. Ask, when do you think this will pay-off, what is the anticipated pay-off, and how do I identify if something has changed and the holding period should change? Investors with a long-term time horizon could find that over the years, they can avoid missing the up periods if they don’t get too intent on missing down periods. If your holdings closely follow the S&P 500 index, it may be down 18% this year, but last year it was up nearly 27%, and that could be a compounded increase from the 16% it was up the prior year.

If instead, your holding period is short, you may know within weeks, days, or minutes if you met your goal or if it is not playing out as expected. At that point, if you would not enter the position (whether you made money or not), getting out may be wise. Smart traders know that if they don’t stick to their plan, even if rewarded, they might be reinforcing a bad behavior that will cost them down the road.

Other Considerations

A large percentage of portfolios managed by self-directed investors are qualified accounts; that is, they are tax-deferred, so any gain does not cost the account holder until funds are taken from the account. This largely takes the tax impact question out of the decision to sell or not. However, if it is a taxable portfolio, it’s important to consider whether the tax consequences and the sale are still worthwhile. In some cases selling at a loss may even help offset gains in some other area of the portfolio owner’s financial condition.  

It’s wise to consult a tax professional to review your specific financial and tax situation before selling a stock or investment for tax purposes.

If you have made a mistake and purchased the wrong ticker, it isn’t likely the shares fit your parameters and the best time to sell is usually immediately.

Change in Ownership

Sometimes it may make sense to sell a company if it has been acquired or merges with another company. Often before an event like this, the stock price rises well above the overall market movement. The question once again is, is this the best use of one’s investible assets? The new fundamentals and cost-saving synergies between the two companies may place it in a more competitive or more profitable position, in this case, not taking the sudden profit could pay off long term.  

Selling a Portion

Did the stock you are holding just shoot up 5%-10%, and you think it is likely to back-off but don’t want to miss out if the euphoria surrounding it continues? Why not make selling a portion, perhaps with the idea that you will re-enter for that portion if the price does drop? In this way, you stand the chance of capturing some of the original run-up, and while you may miss further upward momentum, you have left yourself the opportunity of buying the shares back at a lower price from which they were sold.

Take Away

The decision on whether or not to sell an investment should be held up against the plan you had when you purchased it. Far too many investors make sensible plans entering a trade, but once in and it is either rising or falling, a less sensible side often takes over. Fear and greed are powerful emotions that can undo a good strategy.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.thestreet.com/dictionary/m/moving-average

https://www.thestreet.com/retirement-daily/your-money/consider-tax-loss-harvesting

https://www.bankrate.com/investing/when-to-sell-stock/