Buying/Selling

The discipline involved in buying and selling securities is an important part of achieving investment success. At Linde Equity, we typically buy stocks with an expected 3 year holding period in order for the stock to deliver on its return potential. Often the return potential is achieved in a much shorter time period. Thus, once a compelling stock idea falls into an attractive buying range, the decision to purchase is an easy one.

The decision to sell, however, is often more difficult. To provide discipline to our selling strategy, we typically sell a stock under three scenarios.

  1. The stock has become overpriced.
  2. The fundamentals of the underlying company are starting to deteriorate, yet the share price is still holding up. Let’s sell before the stock starts to fall.
  3. Our favourite reason for selling occurs when we find a new stock which we consider a must-own stock, yet we don’t have sufficient cash in a client’s account to pay for it. We are thus forced to sell a stock to make room. The process of selling the stock with the least prospects to make room for a better one results in the continuous upgrading of the quality of a client’s portfolio and its return potential.