Latest Review : 6-Aug-19 Conclusion - Hold.

Given that I only just bought my Walker Greenbank (LON:WGB) shares today, this may seem a little premature.

However, prompted by Jack Brumby’s piece Why are we so bad at selling   I thought to try out a little thought experiment and spell out publicly under what conditions I would sell.

Why I bought

Very briefly I believe this to be a high quality business  which represents excellent value and as I noted in today’s SCVR I believe momentum could be on the turn (or perhaps has already turned).

When to Sell?

This isn’t intended as a quick trade, but neither do I intend (necessarily) to hold forever, so I’ll lay out here my conditions for selling.

In fact I am not about to become an automated trader, so these are not hard and fast rules, but rather triggers to review my holding with a presumption that I would sell. (Effectively taking the view that if I wouldn’t be a buyer at that time I should be a seller.) In the case of the more positive reasons for selling, I may instead try to “run my winners” and set a fairly tight trailing stop loss, to see if there are any further momentum gains that I can pick up.

So here are my sell conditions :

On a profits warning.

I should (and may) make this a hard and fast rule for pretty much all of my positions; it is all too easy as holder  to make excuses and justifications for the factors behind a profits warning, that is seldom a smart thing to do.

In this particular case though I would say that this is a particularly important rule, sentiment towards “discretionary retail” is fragile and my view is that any mishaps are liable to dent confidence for some time.

If the two year forward PE rises above 13.

This number is somewhat arbitrary, but I justify it on two (flimsy?) grounds.

  • It represents a c. 50% improvement on the current position and this investment fits a rough rule of thumb that I used to use for ‘value’ situations of targeting a 50% return within 3 years (Although more and earlier is always nice!)
  • It’s a PE ratio that I can see being achievable…

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