THE MOTLEY FOOL
ASK THE FOOL Reasons to sell your stocks
Q: When is the right time to sell a stock? — A.P., Baton Rouge, La.
A: That’s a critical question, because your investing results ultimately depend on the prices at which you bought and sold a stock. Consider selling if you have a significantly more promising place to put your money. (If you find only a slightly more attractive place, the tax hit on any capital gains might wipe out the value of moving your money, unless the stock is in an IRA.)
You might also sell if the stock is now significantly overpriced or if the reason you bought the stock is no longer valid. (Perhaps, for example, it’s losing market share or is mired in a scandal.) Definitely sell if you’ll need the money within three to five years, because anything can happen in the short term. Keep money you’ll need soonish in more stable places, such as savings accounts or CDs.
Selling also makes sense if you don’t know much about the company and can’t explain exactly how it makes its money, if you’re just holding for emotional reasons, or if you can’t remember why you bought it.
Whenever you buy a stock, it’s good to jot down why you did so and when you might sell — and to revisit the reasons periodically.
FOOLISH TRIVIA Name that company
I trace my roots back to the 1899 founding of the Reading Glove and Mitten Manufacturing Co. in Pennsylvania. I later made silk lingerie and changed my name to reflect it. I sold my intimates business and am now a global clothing and footwear titan, with brands that include The North Face, Vans, Wrangler, Lee, Timberland, Bulwark, Eagle Creek, Eastpak, Ella Moss, JanSport, Kipling, lucy, Majestic, Napapijri, Nautica, Red Kap, Reef, Riders and SmartWool. Indeed, I’m the biggest producer of denim. I employ more than 60,000 people and rake in more than $12 billion annually. Who am I? Last week’s trivia answer: Johnson & Johnson
THE TAKE Wells Fargo goes its own way
The prospect of rising interest rates has some investors nervous, but the financial industry tends to benefit from a rising-rate environment. That puts Wells Fargo (NYSE: WFC) in a prime position to build on its long-term performance with gains in the years to come.
While many big banks have been seeking to downsize in order to avoid greater regulatory scrutiny and to make their balance sheets look more attractive, Wells Fargo has gone in the opposite direction, becoming the thirdlargest bank by assets as it continues to follow its business model of making conservative yet lucrative loans to consumers and commercial customers. Its track record of avoiding some of the excesses that its peers experienced during the financial crisis has only added to its reputation.
Wells Fargo is more profitable than many of its peers, and tends to have more excess capital than it needs to, making it more able to withstand unexpected losses without running into trouble. That may come in handy, as it recently saw a jump in problematic loans primarily made to the oil and gas industry that has been struggling due to low prices.
Meanwhile, Wells Fargo offers patient believers a dividend that was recently yielding 3.1 percent, and its share price seems fairly priced. (The Motley Fool owns shares of and has recommended Wells Fargo.)