Real Questions from Real Subscribers

Q: First, thanks for your newsletter/stock picks. Since I began using Dow Theory Forecasts my portfolio has enjoyed much better returns. I am nearly 100 percent Focus List with some stocks on the Buy List, however I don't really understand when to sell a stock. Sometimes you make it clear by saying a stock "should be sold". Other times I wonder if I should sell when a stock falls from the Focus List to the Buy or Long-Term Buy List. Is this a valid assumption since most of my stocks are Focus List stocks with some Buy List stocks?

A: Dear Subscriber,

Because we maintain more than one recommended list, we can't use a blanket sell signal when we drop a stock from one list while keeping it on another.

As a rule of thumb, one we've mentioned in the newsletter before, investors following a certain list should sell a stock if it's dropped from that list. In other words, if your investment portfolio tracks the Focus List, then any stock knocked off the list should be sold, even if it remains on the Buy List. Many investors prefer a less-precise method of portfolio management and choose not to sell in such instances; we certainly understand that choice.

So the short answer is, if we drop a stock from the list you're following, feel free to treat it as a sell signal.

The long answer is, while any removal from a list can be interpreted as a sell rating, if we keep the stock on our other buy lists, it means we still like the company's prospects. Sell if you wish to follow a specific list closely. But if you stick with a stock dropped from one list yet remaining on others, we won't say anything bad about you.

Thanks for your interest,

Bob Sweet, CFA
Managing Editor, Dow Theory Forecasts

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