Value Investors: Are You Buying and Holding Forever? Think Again

Value stocks are great, but if you don’t have a goal in mind that stock can quickly turn from value to volatile. So here’s what to do.

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Investors love the set-it-and-forget-it attitude to investing. And I totally understand that. It has led to the rise in exchange-traded funds (ETF), the introduction of more investment accounts, and even more market activity.

Yet when it comes to value investors wanting to take on a set it and forget it outlook, there is a word of warning I would want you to consider.

Nothing lasts forever

We all want to be like Warren Buffett and find those value stocks that are set to climb higher and higher in the years and decades to come. After all, the Oracle of Omaha has done quite well, hasn’t he? Indeed, this top investor has chosen the best of the best. And he has a lot of money to put towards those stocks.

The thing is, while there are value stocks out there, not all of them are worth keeping in your portfolio for decades and decades. The companies that Buffett bought and have surged to the forefront, ones like Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL), are the exception, not the rule.

For most companies, then, if you’re looking for value there should be a plan in place. That’s because most companies go through rough patches. Most companies also eventually close up shop! So here’s what I would consider.

Have a goal

You have goals for your finances, right? Whether it’s retirement or a trip or a house, there are goals you want to reach by a certain period. And that should be the same when it comes to value stocks as well. You do your research, you come up with what you believe is a reasonable price during a reasonable period, and you get in and out at the right times.

Sure, there can be those “what if” moments. “What if I had stayed in just a bit longer? I would have got so much out of it!” Well, what if you did? What if you stayed in longer, and the reverse happened? Take BlackBerry (TSX:BB) for example.

BlackBerry stock surged to the top, only to come crashing down. It’s now a floundering stock that doesn’t look likely to reach three-digit status again. I’m not saying you should be selling stocks after a surge and watching the market like a hawk. But there are still ways that you can get in, and get out easily.

Set it and forget it

Here is where you can really set it and forget it – not buying a stock and forgetting about it for decades. Instead, set up stock alerts. That way you can genuinely forget about the value stock while it climbs higher and higher. Then, once the company reaches a price alert, you can sell it knowing you’ve received exactly what you wanted. No more, but no less either.

Now, there are some great value stocks out there to consider. But one I would pack on for now is Royal Bank of Canada (TSX:RY). RBC stock is a great option as it looks like it’s getting back to normal the quickest, but is still lower than its all-time high. The growth comes from its acquisition of HSBC Canada, which will solidify its position as the largest Canadian bank even more for the foreseeable future.

Yet RBC stock still trades at 12.3 times earnings, with a dividend yield of 4.23% to lock up now.
So if you want a value stock you can look forward to in the next year and beyond, this is one I would consider buying in bulk right now. And then, set a goal you can forget about until that alert comes in.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has positions in Royal Bank Of Canada. The Motley Fool recommends Amazon and Apple. The Motley Fool has a disclosure policy.

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