Even though Warren Buffett’s favorite holding period is forever, even the Oracle of Omaha has reasons to exit his investment positions when he sees a reason to based on many different factors.
Let’s look at some things that makes him sell a stock.
Warren Buffett: When To Sell
Buffett advises not to be anchored to your purchase price of what you bought a stock for. The stock doesn’t care about your entry price but investors can be emotionally moved by their entry price and make decisions on selling that has nothing to do with the future value of the company.
Early in his investing career one reason that Buffett would sell a stock was because he found a better opportunity with a different stock. Opportunity cost is something investors can consider when their capital is limited. He would sell a value stock when he found an even better value to use his capital in.
When he was a deep value investor after learning from Benjamin Graham he would buy when the price was under the true asset value and not priced correctly for the future cash flow of a business and then sell when the true valuation was realized.
He will exit a stock when he becomes very discouraged by the company management or the economic characteristics of the business have changed in a big way.
Even Warren Buffett the original diamond hands has exit signals and strategies. All investors should know when and why they would exit a stock investment.
Warren Buffett recent stock sales
During the first quarter of 2022, Berkshire’s final 675,054 shares of bank Wells Fargo were sold. It’s the first time since 1989 that Wells Fargo isn’t a continuous holding in his portfolio.
Pharmaceutical stock Bristol Myers Squibb was also sold by Berkshire in 2022. All 5,202,674 shares that Berkshire held at the end of 2021 were sold during the first quarter.
AbbVie, which was purchased by Berkshire in 2020, was completely sold. Buffett decided to exit all 3,033,561 shares held at the end of 2021.
Berkshire’s Royalty Pharma holding was reduced by 82%. A total of 7,151,896 shares were sold, leaving just shy of 1.5 million shares still in their portfolio.
The Berkshire Verizon Communications position was reduced by 99% being aggressively sold in 2022. Berkshire, Buffett, and his team sold 157,444,464 shares of Verizon in the first quarter of 2022. As of the end of March, only 1,380,111 shares remain in their portfolio.
When should you sell a stock at a loss?
Whether you are a day trader, swing trader, trend trader, or investor there are key times everyone should sell a stock based on their own trading or investing strategy.
Five reasons investors should sell a stock:
- The fundamentals for the company have changed.
- The reason that the stock was bought is no longer applicable.
- The company has lost its quality management team.
- There are accounting irregularities that show the potential for fraud.
- They cut their dividend payout.
Ten reasons traders should sell a stock:
- The stop loss price was hit.
- The trailing stop loss was triggered on a price reversal.
- The profit target was achieved .
- The chart has become overbought and the reward to the upside is diminished.
- Volatility expansion in price action increasing risk.
- Time stop triggered.
- Large bearish candlestick reversal signal.
- Key moving average lost.
- Double moving average cross under signal.
- Bad news about the company.
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