Sell Your Losers Now?
So you jumped on the bandwagon and dove into the stock market during the last great bull-run. Now you're stuck with stocks that appear to be dead money. Companies like Cisco (CSCO), AT&T (T) and The Gap (GPS) are all way off their all-time highs. So, do you cut your losses and rid yourself of the losers, or is hold on and hope for a recovery?
Jason Trennert from the ISI Group says sell, citing the Wall Street adage about cutting your losses short when you can. But he cautions that you really have to look at each individual stock and weigh the merits of holding versus folding and doesn't recommend a blanket strategy of getting rid of all your losers.
Hilary Kramer of the Cisneros Group also says to sell, noting that many of the biggest losers are essentially "yesterday's innovators," meaning they were searching for dreams that just didn't come to fruition. That includes companies like Ariba (ARBA), JDS Uniphase (JDSU) and Priceline (PCLN), according to Hilary. She says to look for the new innovators, like Microsoft (MSFT), which she believes will get a bounce when Windows XP is launched.
Jonathan Hoenig talks about selling the losers in terms of shoring up a portfolio and taking your losses now. He says you should dump losers and lock-in the tax loss that goes with the sale. Then, a month down the road, if you're still interested in getting back into the stocks, make a play. You have to wait the 30-days before buying back though or you will not be able to claim the loss so be careful, check the tax laws.
Jonas Max Ferris takes a slightly different approach to assessing whether or not you should sell your losers. He says to step back for a moment and forget what the price of the stock was when it was first purchased. Decide right now if you like the company, and if you would buy it at the current levels. If you still see potential for the stock, then hold it. If not, then sell.
Mutual Fund Face-Off
Topic: The best bond fund.
Dagen McDowell of SmartMoney
Jonas Max Ferris of Maxfunds.com
Vanguard Total Bond Market Fund (VBMFX)
Harbor Bond Fund (HABDX)
In the 1960's, Adam West was a smash hit as the "Caped Crusader" in the television series Batman. But his knowledge wasn't limited to fighting the likes of the "Penguin" and the "Joker." Adam takes his investment strategy seriously, and he specifically likes Mid-cap value stocks, believing that right now they deliver more "bang for your buck."
Is he right? Hilary agrees. She likes the mid-caps, noting that these companies are essentially small-cap stocks that have graduated to a higher level. She sees the mid-caps as less volatile and as leaders within the specific sectors. She mentioned three specific mid-cap stocks she says are worth taking a look at:
Harrah's Entertainment (HET)
Grant Prideco (GRP)
Jonas also likes mid-caps for an investment, but suggests getting a mid-cap mutual fund as opposed to picking specific stocks. He likes the Berger Mid-Cap Value Fund (BEMVX). He does warn that because mid-caps have done so well recently, you have to watch for the stock valuations going forward.
Dagen and Jonathan wrapped up the show by answering some email question from viewers.
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