Street Signs

When does it make sense to unload a stock?

As the year began, it seemed like investors on Wall Street couldn’t have asked for a better start. The Dow Jones industrial average was routinely closing at record levels and the road ahead seemed smooth. But in late February, like a splash of cold water, a one-day drop in the Dow of more than 400 points reawakened complacent investors. It was the largest decline since the stock market reopened following 9-11, and it caused anxiety in some investors.

But Coy Satterfield, an education administrator in Atlanta, says he maintained his composure. Though he admits to being a bit alarmed upon first hearing the news, Satterfield calmed down after learning that the drop was in reaction to a decline in the Chinese market. “Considering the potential for volatility on any given day and how well the market had been doing lately,” he says, “[the market] was still a solid haven for investments.”

Satterfield, 56, says he’s learned over the years not to panic and to trust his instincts. Besides, the triggers to sell often seem clear. “It didn’t take a rocket scientist to see the handwriting on the wall,” says Satterfield of his stake in Delta Airlines. As an Atlanta resident, Satterfield had been a supporter of the locally-based airline, but he decided to sell four years ago after signs that the company “was clearly headed toward bankruptcy.” This included news of turmoil amongst the pilots, scrutiny of the airline’s pension plan, and an exodus of employees who were taking early retirement to avoid pay cuts. In the end, he sold his 30 shares at $45 a share, taking a loss of some $22 per share. In 2005, Delta declared bankruptcy and shares now trade for less than $1.

The message? There’s no magic in deciding when to sell a stock. You should closely track the companies you own, as well as their competitors. If the prospects have waned since you bought the stock, it’s time to cash in and look for a better investment.
“When you invest in individual stocks, they require close scrutiny,” says Richard Peace, an independent financial planner with Advantage Capital in Colorado Springs, Colorado, who advises Satterfield. “However, you should avoid the emotional roller coaster of the stock market.” All too often, investors chase returns and buy when stocks are high, then sell low at the earliest signs of a decline.

Mixed Signals
This month, Apple Inc. (AAPL), rolls out its highly anticipated iPhone. The company’s entry into the mobile phone market marks just one more step in its transition from a personal computer company to one of the country’s most successful retailers, a consumer electronics innovator, and an undeniable powerhouse in the music industry. Just three years ago the stock was trading near $14 a share, and in late March it closed at $93.52 a share–a 568% increase. But even such a dramatic climb in a relatively short period doesn’t mean there weren’t some potential sell signals along the way.

Last year, Apple ran into a few problems. There were rumors

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