How to know you can sell stocks as a buy-and-hold investor.

How I decide when to sell a long-term stock.

Everybody wishes they could just buy and hold a company forever. It grows forever, and it lives in your brokerage.

That might be our goal, as long-term investors. Yet, it doesn’t always happen. Companies like Toys' R ' Us, Tower Records, and Compaq show us we can’t just hold and hope.

There are real reasons to sell a company you're holding for the long term. Here are a few I consider when debating whether to sell.

The business refuses to evolve.

One of the main reasons is a company that tries to stay in the past.

Blockbuster.

They dominated the movie industry. If you watched movies before streaming and the internet, you knew of Blockbuster.

Netflix happened.

They were changing the game towards streaming and online movie watching.

Blockbuster actually built a competitive online service. That was beating Netflix in growth at the time. The writing was on the wall.

Yet the CEO decided to make a fatal pivot.

Instead of being the leader of the digital future, leadership decided to double down on its physical retail stores. They believed the face-to-face customer experience was a better way to go.

They wanted to live in the past. Ignore statistics and fundamental changes in consumers and what they want.

By the time they realized the world had moved to streaming, it was too late. They went from a $5 billion valuation to bankruptcy in just a few years.

They have one store left in Oregon.

How the mighty can fall. Huh?

Now it’s hard to predict these things. People in the 2000s wouldn’t have guessed the sheer size streaming has grown into. Yet, even back then, there were stats and a general idea that the internet was the future.

Don’t get stuck in the past.

Don’t get stuck with a company that refuses to change.

To grow.

Don’t hold the bag.

When the company changes.

When a successful company decides to completely change its plan. Changes

Under Armour

Under Armour was meant to be the next Nike.

Until they decided to change from performance gear to fashion and tech.

In 2015, Under Armor was the fastest-growing sports brand in the world.

The best athletes like Antony Joshua.

The ‘new n cool’ boy on the block.

They decided they didn’t want to be the sports and shoe experts. They wanted to be a tech giant.

They spent $710 million in a single year buying ‘fitness apps’. They pivoted away from performance shoes and clothing towards lifestyle and AI generation.

They ignored their core product (shoes and sports shirts) to chase a tech dream they didn’t understand.

They were at the top of the game and decided they didn’t want to play anymore.

The minute the ceo said: “we are changing to a tech company.” I wouldn’t be able to sell quickly enough.

Allbirds is another example. I believe a future example will be GameStop.

If they buy eBay.

You have to realize the amount of debt they will take on when considering what will happen when they buy the company.

As much as this isn’t a completely new sector, like Under Armor. They are still going to enter a new sector they don’t understand, with debt up to their eyeballs.

This part of selling a stock reminds me of a famous quote.

“If it ain’t broke, don’t fix it.”

My money could be better elsewhere.

A lot of my recent sold positions fit into this category.

The S&P 500 returns.

Are you expecting the stock to decline in the short term before a rally?

Is there a stock in the next year you think could go up? Would the money be better there, or in that company you think will need a few years to recover?

Nike.

All their projects for 2016 says there stats will go down. From sales in China to income predictions.

I believe in the new CEO, and I believe he will implement a strategy that will help Nike grow back into a solid company.

Yet that will take a few years. Do you really want to wait 5 to 10 years to start making your money back? When something like the S&P 500 can give you something better back?

Why jump into or hold onto a company that is destined to go down in the short term? Even if they are going to go up in the long term.

Your money is better spent elsewhere.

If selling is something you find too hard, then just buying a global index or the S&P 500 is a better bet.

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Till next time

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