It’s one of the most important questions when you’re investing for capital gains: When do you sell?
How can you tell when a stock has peaked? Sell too soon and you risk losing potential profits. Wait too long and the moment may pass.
In a recent Real Money column, Paul Price walks readers through this very dilemma as he decides whether to sell his own shares of the retail company Caleres (CAL) – Get Report. Read the full column and get more trading ideas and investing insights.
The first thing that Price looks at is the fundamentals. How well is this company doing?
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“Shoe retailer Caleres reliably generated at least $2 and as much as $2.21 in earnings per share in all five fiscal years from 2015 through 2019. Throw out the Covid-ravaged fiscal 2020 as an outlier event, due to government imposed closure of CAL's stores.”
Then he takes a look at t! he technical data. Do the numbers support what the business model has to say about itself? Essentially, does the market agree with this fundamental analysis?
“CAL's typical price-to-earnings runs about 14-times. Applying that P/E to CAL's fiscal 2022 estimate supports a greater than $35 target price over the coming 18-months or so. Achieving that price point would deliver about 40% from here. Better still, that goal might end up proving too modest,” he writes.
For Price, avoiding selling too soon or too late comes down to careful analysis.
Get more trading strategies and investing insights from the contributors on Real Money.
“How can I resist taking profits on a stock that's risen by over 700% since its COVID-panic bottom?” Price writes. “It's all about valuation. I see no reason that Caleres won't be $35 to $40 by Dec. 31, 2022.”