[[Start here]] → [[What works in stocks?|what works]] → [[maintain your discipline|discipline]] → [[when to sell]] --- ![[sell-story-changes.png]] As [[promising stocks have easy to understand stories]] it’s easy to become attached and forget that *the story will change*. Jim Slater explained that “*the story of a stock is an important cross-check to which you must continually refer back and check against each new development*.”[^1] In the Portfolio Management chapter of the Zulu Principle he offers the analogy of a race-horse owner who has bought 10 promising yearlings. “*Seven prove hopeless, two quite promising and the last an absolute star*”. All may have been bought for the same reasons, but when it comes to cutting stable costs, it’s obvious which should be sold. Time will change our justifications for owning the stock, so it’s essential from the outset to *write down the reasons why you bought in the first place*. If the story improves for the better, then all is well. If the story worsens, then we must be vigilant and often we should sell. Profit warnings are one of the most striking examples of a reset in expectations. Slater states that “*you want to be first in the queue of disappointed enthusiasts*”. Our own research suggests that you should [[sell immediately on a profit warning]], in all cases except in the highest quality names. The ways that a story can materially worsen can depend on the [[there are six different categories of winning stocks|style]] of the stock. [[Fast Growers]] may leave a trail of indications that growth is slowing: like-for-like sales growth disappointment, key executives are leaving or selling shares, competition escalating. [[Turnarounds]] may have already turned around, [[Cyclicals]] may start overinvesting or see inventory growth. If you forget the reasons you invested in the first place, you’ll have no idea why you should sell. Remember not to fall in love with any stock. From the outset, write down your reasons, classify the opportunity, and assess newsflow against your thesis. If the story materially changes, sell. [^1]: [[Slater - The Zulu Principle]]