Advice on selling YHOO holding

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
letsinvest
Posts: 25
Joined: Thu Jul 28, 2011 1:30 pm

Advice on selling YHOO holding

Post by letsinvest » Mon Oct 24, 2011 3:37 pm

Hi,

I have bought 2000 stocks of Yahoo @ $20 each 2 years ago and since then the price are below $20. Can someone please advice me should I sell it at current price or what strategy I should take?

Thanks in advance

User avatar
nisiprius
Advisory Board
Posts: 36481
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Advice on selling YHOO holding

Post by nisiprius » Mon Oct 24, 2011 5:43 pm

I am not sure what advice you expect in a forum "inspired by Jack Bogle," who wrote:
Pillar 5. Diversify, Diversify, Diversify.

As the bear market of the past year makes clear, investing in stocks is risky: First, there is individual stock risk. We have seen some stocks soar and some plummet, with little means of knowing which stock will do which, and when. Who would have expected that Cisco, whose $500 billion market capitalization a year ago made it the largest stock in the world, would soon plummet by 80%, erasing $410 billion in value?

Second, there is style risk...

Third, there is manager risk...

Happily, each and every one of these three risks can be easily eliminated. For when you own the entire stock market through an index fund, there is neither individual stock risk, nor style risk, nor manager risk. Only market risk remains. If the past year, demonstrates nothing else, it surely demonstrates that stock market risk, standing alone, is quite substantial enough, thank you. So if you can’t be certain about the future—and who among us can?—"diversify, diversify, diversify" remains the essence of wisdom.
Having already invested what for me would be a very large sum in a single and rather speculative stock, it's hard to know what to say. The obvious question is: did you have a plan for this investment when you bought it, and, if so, what was that plan? If you have a plan, my advice would be to follow your plan.

If you do not have a plan, then, well--by the way I don't see how you could have bought it at $20 in the last two years, did you mean three?--your stock is at $16. You have seen your stock as high as $20 so it could certainly reach that price again, and you have seen your stock as low as $9 so it could certainly reach that price again. What you need to do is acknowledge that neither you nor I nor anyone else can guess what is going to happen next, so you have to balance off the feelings you would have in each of these four contingencies. Reach each of these lines and judge your emotional reaction:

1) I sell, the stock goes down to $9
2) I sell, the stock goes up to $20
3) I hold, the stock goes down to $9
4) I hold, the stock goes up to $20

Then take the course that seems to offer the best balance as measured by your personal value system.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
grabiner
Advisory Board
Posts: 22543
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Advice on selling YHOO holding

Post by grabiner » Mon Oct 24, 2011 5:58 pm

letsinvest wrote:I have bought 2000 stocks of Yahoo @ $20 each 2 years ago and since then the price are below $20. Can someone please advice me should I sell it at current price or what strategy I should take?
If the stock is now worth $16, then you have $32,000 to invest. It doesn't matter whether the $32,000 is currently in Yahoo, or in an S&P 500 index fund, or in a bank account; its future value depends only on what you invest it in tomorrow. Therefore, you should have an investment plan, and invest according to your plan, independent of what you hold now.

(One exception; if this is a taxable investment, you should sell because you have an $8000 capital loss which will reduce your taxes. Then, if holding some Yahoo stock fits your investment plan, you can buy it back in 31 days, but the $8000 loss is likely to be about $2000 of tax savings.)
Wiki David Grabiner

letsinvest
Posts: 25
Joined: Thu Jul 28, 2011 1:30 pm

Re: Advice on selling YHOO holding

Post by letsinvest » Mon Oct 24, 2011 6:57 pm

Thanks for you advice.

Well when I bought this stocks I was new to Investment and this was my biggest mistake which I realized only after buying it and price went down from there on. :(

After that I have read lot of books about investment and one of them was Jack Bogle's "Guide to Investment". Now that I am learning Investment I want to get experts opinion on this forum before I take my next step.

Now that there is lot of Market speculation or rumors about Microsoft and Google interested in buying/investing in Yahoo, should I wait for any results or just sell the stocks and bear the loss? Or should I sell it part of it?

I would definitely want to move to Jack Bogle's way of investing "Diversify, Diversify & Diversify".

Thanks again.

User avatar
LazyNihilist
Posts: 874
Joined: Sat Feb 19, 2011 9:56 pm
Location: 6.66% (xirr)
Contact:

Re: Advice on selling YHOO holding

Post by LazyNihilist » Mon Oct 24, 2011 7:22 pm

letsinvest,

Both Nisiprius and Grabiner have given excellent advice in their above posts.

Ignore what the current yahoo price is, we cannot predict if the value of yahoo stock will go up or down.
You read Bogle's Guide to Investment, try reading more books and look around the wiki.
Now you need to set an Investment Plan for Your Needs. This is the most important thing for you to do now.
Bogleheads are very helpful in answering any questions you may have while setting up your Investment Plan.
Once you have the plan, sell of the yahoo stock and invest according to your plan.

Also, we all make mistakes. Don't worry about what you have already done. From now on try to follow the advice below
Taylor Larimore: The easiest way to beat the average investor, professional or otherwise is to: save regularly, avoid mistakes, have an asset-allocation plan, diversify with broad-market index funds, keep costs low (including taxes), strive for simplicity, and stay the course.
The strong do what they can and the weak suffer what they must -Thucydides

User avatar
grabiner
Advisory Board
Posts: 22543
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Advice on selling YHOO holding

Post by grabiner » Mon Oct 24, 2011 7:33 pm

letsinvest wrote:Now that there is lot of Market speculation or rumors about Microsoft and Google interested in buying/investing in Yahoo, should I wait for any results or just sell the stocks and bear the loss? Or should I sell it part of it?
Everyone knows about this speculation, and that is why Yahoo's current price is what it is. If there is a 50% chance that an event will cause a stock to be worth $20, and a 50% chance that the event won't happen and the stock will be worth $12, then the stock should be worth $16 now.
I would definitely want to move to Jack Bogle's way of investing "Diversify, Diversify & Diversify".
And the importance of diversification is that you get the benefit of all of this speculation with less risk. If Yahoo stock falls by 25% tomorrow (which could easily happen), you will lose 25% if Yahoo is your whole investment. If you have a diversified portfolio and Yahoo is just 1% of the portfolio, then you will lose only 0.25% because of what happens to Yahoo tomorrow. You still have the potential for gains from all the stocks you hold, but no one stock can cost you a huge amount. And whichever stock happens to be a takeover target or report a breakthrough, you are guaranteed to get a share of those gains, rather than playing the lottery.
Wiki David Grabiner

Jfet
Posts: 1081
Joined: Tue Dec 21, 2010 7:20 pm

Re: Advice on selling YHOO holding

Post by Jfet » Mon Oct 24, 2011 7:35 pm

There is a lot of speculation on yahoo right now as to it being bought (by Alibaba, Microsoft, Google, etc.). I have no idea if anyone will actually buy it, but it does create a nice spike in the options, so....

You could sell something like jan 17.50 calls for $1.30 against your shares, and keep doing this 3 months out until either yahoo is sold (would probably be above $18 so you would get called away) or you get tired of earning 35% per year on your shares.

A lot of trouble though...I think I would just sell in the next week or so when it spikes to $17 on a rumor. It hit $16.70 something today.

I should disclose that I do believe yahoo will get bought and have purchased a jan 2012 $12.50 $17.50 call spread for $2.25, which will pay off around 122% if the stock price exceeds the upper call. This is not for the feint of heart, neither was the short position I took in Netflix recently at $119, but looks like that is going to pay off big time. I am down in my CRM short, so you can't win them all. :D

cheapskate
Posts: 745
Joined: Thu Apr 26, 2007 1:05 pm

Re: Advice on selling YHOO holding

Post by cheapskate » Mon Oct 24, 2011 7:47 pm

As someone working in this space, the only thing I can recommend is to cut your losses, craft an Asset Allocation plan and move into it (using Vanguard index funds).

I don't know, but I suspect you might have bought Yahoo! as a turnaround play. Unfortunately, Yahoo! is stuck in a death spiral. This is a classic case of a company with valuable assets and a large user base that has just squandered away all it's advantages by gross mismanagement. Quite sad really. They have had a revolving door of CEOs and other top execs, have acquired a long string of losing companies only to shutter most of them down, are utterly unable to launch new products. If you have been following their results, they are losing market share quite steadily to the competition (Google and Facebook mainly), revenues are stuck and profitability is low (compared to the competition). You will see plenty of "analysis" on the web (delivered for free) that will claim that Yahoo! is a good value considering the cash on books, Alibaba stake and Yahoo! Japan stake. The problem here is that I don't think the Alibaba and Yahoo! Japan stakes are liquid assets (Yahoo! cannot sell them easily), while their core business is deteriorating rapidly. The best case scenario for Yahoo!'s survival is to have a private equity team take the company private, massively clean up operations internally, cut down on the bloat, make the company nicely profitable (but smaller). It is not a given that will happen.

As you have probably heard, Google and Microsoft (separately obviously) are in talks with Private Equity firms to buy Yahoo!. Alibaba (of China) is also circling around the carcass. But it is extremely unlikely that Yahoo! will garner a significant premium to it's closing price of today even if a sale were to go through because Yahoo! is not dealiing from a position of strength at all.

I can only echo the excellent advice you already have got here.

a) Sell Yahoo! now and take the tax loss.
b) Craft an asset allocation (age in bonds, in a Total Bond Market fund and the rest equally split between US and Intl Total Stock Market funds).
c) Move the proceeds into your asset allocation, using lowest cost Vanguard index funds.
d) Save regularly and invest.

kaitlynil
Posts: 5
Joined: Tue Oct 25, 2011 8:18 am

Re: Advice on selling YHOO holding

Post by kaitlynil » Tue Oct 25, 2011 9:16 am

I sold YHOO after the aliba scandal and took the loss. I sold it for 15. Too much of a roller coaster ride.

User avatar
greg24
Posts: 3218
Joined: Tue Feb 20, 2007 10:34 am

Re: Advice on selling YHOO holding

Post by greg24 » Tue Oct 25, 2011 9:23 am

Sell the stock and purchase a mutual fund.

letsinvest
Posts: 25
Joined: Thu Jul 28, 2011 1:30 pm

Re: Advice on selling YHOO holding

Post by letsinvest » Sat Oct 29, 2011 12:21 pm

Thanks All for your advice. I think I will start selling off Yahoo stocks in chunks (500 stocks at a time).

Post Reply