The Iconoclast Investor

A few weeks ago we did a series where we answered your growth investing questions. This week J. Royden Ward is going to answer your value investing questions. Please feel free to ask more questions or just send us a comment.

Question: I started buying value stocks in May and June and some of those are already down more than 20%. I know that we are on buy and hold but in the Cabot newsletters Tim Lutts [Cabot Chief Investment Officer] emphasized selling stocks that have lost more than 20%. Your thoughts?

Answer: Tim and others are referring to growth or momentum-type stocks.  I do not recommend selling a value stock because it has declined by a certain percentage.  In fact, unless a negative long-term event has taken place, I usually advise buying more shares at the lower price.  If a stock is a bargain at the price you paid, the stock is a better bargain at a lower price, rather than a candidate for a quick sale at a loss.  Investing in value stocks requires a lot of patience and longer holding periods, but the end results are often spectacular.  Buy low and sell high, regardless of what other investors are doing.