Live Answers To Real Questions
Over the years we've found subscribers tend to be concerned about the same things. So, here are answers to some real-life questions more than one subscriber has asked us. Questions have been edited for length and clarity.
Buying and selling
Q If I were to convert my existing portfolio to the Buy List or the Long Term Buy List, should I buy them all at once, or little by little?
A Our Buy List and Long-Term Buy List are complete-portfolio solutions. We aren't fans of trying to select a few favorites from the lists; such a strategy is both difficult and risky.
If you intend to follow one of our portfolios, buy all the stocks at the same time. Any company on the list is fair game for buying today, with the caveat that if situations change and we lose confidence in a stock's ability to outperform, we won't hesitate to sell. From then on, you can make trades as we make rank changes.
Any time we buy or sell, we'll announce it in the Rank Changes box, usually on page 6 of the newsletter. In addition, we present all rank changes in our twice-weekly hotlines, available online at the Subscriber Area of www.DowTheory.com, as well as via e-mail and telephone. If you don't receive our Wednesday and Friday hotlines through e-mail, call customer service at (800) 233-5922 or log into the Subscriber Area, then click on the Contact Us link at the top of the page.
If you prefer, you can listen to recorded hotlines using your phone. Dial (800) 931-2295 and enter the three-digit passcode found in the Rank Changes box on page 6.
Don't try to predict which stock we'll sell next. In fact, we don't know what's next until it happens. We analyze our recommended stocks on an ongoing basis, and when our opinion changes, we sell. No preamble.
Q If a stock is dropped from the Focus List is it a sell, or is it too late by then?
A We follow our recommendations in real time, just like you do. If your investment strategy involves mimicking one of our recommended lists, when we drop a stock from that list you should treat the news as a sell recommendation. Even if we leave the stock on another of our recommended lists.
We don't maintain Sell ratings on stocks, nor do we have a Hold rating. We prefer to keep our focus on our favorite equities and advise subscribers to own only our best ideas. As a rule of thumb, if the reason you purchased a stock no longer applies, it may be time to sell.
Q Why do you sometimes sell stocks at a loss rather than waiting for them to come back to breakeven?
A Our sell decisions are made almost entirely on the basis of whether a stock is likely to outperform over our target holding period, rather than on the price we paid for it. Sometimes it's better to sell a troubled stock at a loss than hold onto it while it becomes even weaker. Remember, your objective is not a high winning percentage. Your objective is growing your portfolio, which we think is best done by limiting that portfolio to stocks you truly like.
Our Quadrix system
Q How does QuadrixÂ® help me decide whether to bail on a stock? Your numbers have been great for finding stocks about to break out; I just don't know when to sell.
A Quadrix is not designed to identify buy or sell points, at least not on its own. We use Quadrix as a first screen, not a buy signal. While stocks with high Quadrix scores tend to outperform, not all of them are worth buying, which is why we follow up with individual company analysis.
High scores mean we like a stock enough to consider it as a Buy, but when the Overall score sinks below 80, we'll give a stock an extra look as a possible sell candidate. A dip below 70, and especially below 60, suggests a stock has some serious problems. But as a rule, a decline in Quadrix scores alone will not prompt us to abandon ship.
The Monitored List
Q Whenever I do research on your website, I find lots of stocks with high Quadrix scores that you don't include on your Monitored List. Why not add them? And do you provide A, B, or C ratings for all the stocks covered by Quadrix the way you have an A, B, or C rating for stocks in the Monitored List?
A Our Monitored List contains more than 170 stocks we rate A (above average), B (average), or C (below average). All stocks on our buy lists earn A ratings. When we initiate coverage, we add a stock to the Monitored List and provide it with a rating. We generally limit the Monitored List to large companies, plus any stocks we recommend for purchase.
While we compute Quadrix scores for more than 5,000 stocks, our A, B, and C ratings reflect more than just Quadrix scores, also taking into account individual company analysis. As such, we can't effectively cover the entire Quadrix universe, or even the roughly 1,000 with Overall scores of 80 or higher.