Wednesday 14 January 2015

The Little Book of Big Profits from Small Stocks Summary - Chapter 10

Chapter 10: Well Bought Is Half Sold

1.      A stock bought right is half sold.
2.      A lot of our selling decisions will be made for us by the market itself.
3.      When you start investing in low-priced breakout stocks, it is necessary to monitor your portfolio on an ongoing basis.
4.      When you have a loser:
a.       When a stock moves against you, see what you missed in the original analysis. Ask yourself: Are you wrong or are you just early?
b.      You are looking for material negative changes in the company or its outlook since you originally bought the stock. If there are any, then you want to sell the stock.
c.       Watch what insiders are doing with their stock. If there is persistent large selling by officers and directors you want to challenge your original conclusions, and to sell your stock right away.
d.      Things changed so you changed your opinion, which is the smart and correct way to approach the sale of a stock that did not work.
5.      When you have a winner:
a.       Check the fundamentals and news from your winners and make sure you think they can still breakout higher and deserve a place in your portfolio.
b.      Ride the wave and let your profits grow (when the fundamentals are improving).
c.       If business starts to slow and is no longer improving, it is time to sell.
d.      As a stock climbs higher, it’s often a good idea to scale out of a stock (i.e., it’s a great idea to sell some of your position when a stock had doubled in price).

e.       My favorite reason to sell a stock is because it’s been acquired. To close the deal buyers have to pay a premium to the current market price and this means profits for you!


Chapter 11: Beware the Wolves of Wall Street

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