John Neff on when to sell a share

Click herJohn Neff is one of the greatest investors of the twentieth century; a value investor with a particular emphasis on low price earnings ratios. He acknowledged that deciding when to sell is the toughest investment decision. Unfortunately it is far too easy to fall in love with the shares in your portfolio.

You must remember that your shares represent a business and if the underlying business is not performing now, and you see no upward turn on the near horizon, you must part with them.
All Neff’s shares were for sale, yet he was not averse to holding some for three to five years.  However, at times if a share was not living up to expectations it may only be held for only a month.
Thus, a share may be sold if the fundamentals of the business have changed (e.g. strategic position or management) since the purchase or a mistake in the original analysis is revealed. Thus it’s important to regularly update your analysis so that each share in the portfolio has a clearly visualized potential for a rising share price.
The difficulties
There are two major hurdles an investor must clear when making the decision to sell.

1. Parting with a share and admitting you made a mistake in its purchase in so far as it has not lived up to your expectations. You must swallow your pride and exit as swiftly as possible.  This requires you to be extremely self-critical as well as analyse the company on a regular basis.  If you are simply holding on because of your past enthusiasm or your love for it, you must put these feelings to one side and consider only its earnings growth potential.
2. More difficult still is timing the sale of your successes. The knack is to sell at the time when the share is fairly valued and not hold on for too long and miss the

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