The middle 13 stocks are trading at fair value, or a slight overvaluation. I'll continue to monitor these, especially WMT, WFC, and CVX. No action yet on any of these in either direction, though I'm ready to trim the ones nearing 20% overvaluation.
The last eight are getting into "dangerous" waters. They are trading at premium to what the market has been willing to pay for these stocks over the past six years. I will look at % each makes up of the portfolio, and definitely trim them back to a 2/3 position. I don't like to sell completely, unless they really get overvalued, say around 50%. I'll keep a close eye on ADM and WAG, and sell these completely if they continue to swell. (Note: I've trimmed all of the "red zone" stocks previously except SO).
I always struggle with the decision to sell stocks, especially after a nice long run up in price over years. I become emotionally attached to these names, like WAG for instance. Warren Buffet tends to hold his stocks, even through periods of overvaluation. Take a look a Coke over the past 21 years, Warren has held and added to his KO position throughout this period:
The PE ratio for Coke got up to over 47 in 1998, and then corrected downward for the next 10 years before returning to a more "normal" PE of 15-20. Wouldn't Warren have been wise to unload his position when the PE got that high? Seems like a yes to me. If the historical PE is 28, than at 47, the PE was a whopping 68% above normal.
Looking at my stocks, WAG at 49% above "normal" looks a little dangerous. So, do I emulate Buffet and hold, or sell and look for a better value? Any thoughts?
That's all for now,