The Iconoclast Investor

Here’s the fourth question in our value investing Q&A series. Please send us any comments or questions.

Question: I would like to buy IR at 38, when would I sell if it kept on going down?  Thanks.

Answer: Thank you for your email regarding Ingersoll-Rand (IR).  The stock has been selling at a bargain at around 34 recently.  You have chosen an excellent company that will hopefully become a solid long-term investment for you.  The volatile market that we are in will probably cause some volatility in IR shares as well.  If IR drops 15% to 31.25, I advise buying more shares.  I doubt very much that the stock will go that low, but it is good to plan your strategy ahead of time.  IR’s objective to sell off cyclical, low margin businesses and to buy businesses with faster, steady growth is working well thus far.  The purchase of Trane is a big move, and I will be monitoring IR’s progress as the company integrates Trane.  If IR management falters in any way, I will issue a sell recommendation.  Since that is unlikely, I expect my sell recommendation will not be issued until the stock reaches its Minimum Sell Price.  I do not recommend selling your shares if IR declines in price.