When is the Right Time to Sell a Stock?

Investors should compare share price to intrinsic value and also consider their alternatives before making a move, says StockInvestor editor Matt Coffina

Matthew Coffina, CFA 23 February, 2015 | 11:32AM

One of the biggest questions stock investors have is when to sell. To shed some light on the subject, we sat down with Matt Coffina, an equity strategist at Morningstar and editor of the Morningstar StockInvestor newsletter.

Before You Sell

Question: Matt, what are the key things that investors should keep in mind before exiting a stock position? Is a big sell-off or run-up in the stock enough to raise a red flag indicating that you should get out?

Coffina: The key thing to keep in mind is how a stock's price compares to its intrinsic value. This is true both on the upside and the downside. Say some news comes out that a company's margins are going to be much higher than other investors previously anticipated, than you previously anticipated, and the stock runs up 20%. Is that a time to sell? Well maybe the fair value estimate on that stock is actually up 30%, in which case it could be an even bigger bargain than it was before the news was released.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Matthew Coffina, CFA  is a stock analyst at Morningstar.

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