Yahoo Finance Get out now: stocks to sell before it's too late
They may look healthy right now, but there are some Australian stocks which could pose a risk to your portfolio if you don’t get out quick enough.
The Australian stock market has fallen by 12.4 per cent to a low of 5,675.9 points on November 21, from a high of 6,481 points as recently as August this year.
“If you haven’t sold stocks in the second half of this year, it may be too late,” Dale Gillham, chief analyst of Wealth Within and author of Accelerate Your Wealth said.
Three stocks you should consider selling
Gillham has identified three companies to watch closely for 2019, indicating that a further fall in prices would mean its time to sell up and get out.
South32 Limited: “South32 (S32) released some good results this year, however, falling commodity prices have weighed heavily on the stock in the current quarter,” he said.
He pointed out that S32 is down by around 27 per cent from the high of $4.28 in October 2018. Although S32 may rise from here temporarily, the risk exists for S32 to continue the decline.
“Therefore, if the share price reverses and again trades below $3.09, the probability of a further significant decline increases for S32.”
The stock is currently trading at around $3.13.
Altium Limited (ALU): “ALU recently fell by around 34 per cent from its high of $30.51 in August into a low of $20.10 in October 2018.”
“This stock can be highly volatile and is not one for the untrained investor,” Gillham said.
“There may be some short term upside, however, a fall below $20.10 would indicate that ALU is likely to continue its decline to around $15.”
The stock is currently trading at around $22.78.
JB Hi-Fi Limited: “Typically, JB Hi-Fi Limited is a stock we would keep on our watch list of potential buy opportunities, however, following the launch of online retail competitor Amazon, the stock has been lacklustre,” Gillham said.
The market is closely watching retail spending and JBH needs to generate strong sales this festive season.
“Now is not the time to sell JBH, however, if price were to fall below $22.06, the decline is likely to continue and, therefore, the risk of continuing to hold would be too high,” Gillham said.
The stock is currently trading at around $23.31.
Know when to sell
Savvy investors will have already sold the stocks that represented the greatest risk to their portfolios, Gillham said.
“If you don’t know what level of risk you are currently taking, then every time the market falls you will be stressed.”
“Your level of stress simply indicates that you currently don’t have sufficient knowledge to properly manage your risk,” he said.
How to survive a volatile market
Gillham suggests that in order to manage risk, investors should set a stop less at a certain percentage below the purchase prices – typically at around 15 per cent.
“I’ve seen investors choose to hold a share only to see price fall to 50 per cent of what they paid,” he said. “This means you need to make 100 per cent on the share just to get back to break even.”
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