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KIRK KAZANJIAN<br />
the market averages on the way up, but rather building insurance<br />
protection by squirreling away cash in the event of a fall. Even Warren<br />
Buffett got out of the market once. He returned money to his shareholders<br />
in the late 1960s, and it turned out to be a pretty wise move.”<br />
A final reason Davis will abandon a holding, and one you already<br />
know is shared by his colleagues, is if he finds a more <strong>com</strong>pelling<br />
stock in which to invest his money. “As an example of that, I built<br />
up a position in a couple of paper stocks in 1995 and sold out about<br />
a year later after they failed to perform,” he offers. “I didn’t lose<br />
anything, but decided that even though there would likely be another<br />
shortage of paper in the future, the industry really hasn’t been that<br />
great to investors over the past 30 years. So I decided to move the<br />
money into several brokerage stocks instead. While both are volatile<br />
areas, I feel the brokerages will grow faster. The demographics are<br />
more favorable.”<br />
BRAMWELL: A FREQUENT TRADER<br />
Elizabeth Bramwell has a slightly heavier hand than Stovall,<br />
Yacktman, Davis, and Papp. She trades around 60 to 90 percent of<br />
the positions in her portfolio each year. “I’d like to hold a stock for<br />
at least 18 months to take advantage of the 20 percent long-term<br />
capital-gains tax rate,” she says. “However, the small-and mid-cap<br />
stocks I tend to buy are volatile and may require more frequent trading.”<br />
Given these inherent risks, she also keeps a highly diversified<br />
portfolio, owning an average of 80 different stocks at any given time,<br />
well above the 30 or so re<strong>com</strong>mended by those who stick with larger<br />
names.<br />
The primary reasons Bramwell moves out of one holding and into<br />
another are because a <strong>com</strong>pany’s fundamentals deteriorate, a stock<br />
be<strong>com</strong>es excessively priced relative to its future growth potential, the<br />
macroeconomic outlook turns bleak, or she finds better places to put<br />
her money.<br />
THE BOTTOM LINE<br />
While you should go into every stock position with the intention<br />
of holding on forever, sometimes it is necessary to sell. Here are some<br />
good reasons to let go:<br />
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