Buy/Sell on Portfolio Summary or Portfolio Trend does not match SSG

With a long-term stock investing philosophy such as the one taught by BetterInvesting or used in Toolkit 6, it's rare that a company in your portfolio may reach a price at which one might conclude that its stock is over-valued and thus ripe to be sold.

More frequently, you are likely to find that companies that you already own are priced at a reasonable level and are good candidates for additional investments. The Portfolio Summary Report in Toolkit 6 is a great resource for quickly reviewing your current holdings with an eye towards finding opportunities for adding to your positions. In fact, this report is so useful that if your investment club only provides one report on the club portfolio to members each month, this is probably the report to choose.

One common point of confusion about this report is the last column on the right, labeled "REC." This is the "Recommendation" generated by Toolkit based on the judgment that you have entered into the program for each company, and could be either "Buy" or "Sell." (A "Hold" is otherwise implied by a blank field here.) Frequently, this recommendation doesn't match the recommendation in the Toolkit 6 Stock Study. Why not?

The information on this report is actually based on the data in the Stock Management Guide for each company (known as the "Portfolio Management Guide" in BI nomenclature), and it incorporates some additional information. Since the Stock Management Guide is the tool used to manage a stock that you already own (in contrast to the Stock Study, which is designed to help you make a purchase decision), this form helps you track the changes in valuation and identify buying opportunities. This data is aggregated in the Portfolio Summary Report for all of your holdings in a selected portfolio.

A "Sell" is triggered on the Stock Management Guide and in the Portfolio Summary Report if three conditions are met:

1. The price is in the Stock Study's Sell range,
2. The P/E is at least 150% of the projected 5-Yr Average P/E (Relative Value of 150% on the SSG), and
3. The Projected EPS Growth Rate is less than 12%.

There are two criteria that trigger a "Buy" recommendation on the report:

1. The price is in the Stock Study's Buy range, and
2. The P/E is at or below the 5-Yr Average P/E (Relative Value of 100% or less on the SSG).

Otherwise, barring some adverse change in the fortunes of the company, it is usually considered prudent to continue to hold the stock.