There's a big difference between buy-and-hold and buy-to-hold. The former means buying a stock and never looking back at it again, while the latter means buying with the intention of holding as long as one's investment thesis is intact. Most of the time, we agree with Warren Buffett -- the best holding period for a stock is forever -- but there are exceptions to the rule.
Over the past few weeks, three of The Motley Fool's Rising Stars have sold shares of companies they once touted. Read on to see what their reasons were, and at the end I'll give you access to a special report on one stock you should consider holding for the long run.
There's no love lost between Rising Star Alyce Lomax and the U.S.' leading solar provider: As she stated, the company "has lost my confidence in almost every conceivable way since I purchased shares last September."
The list of complaints is long. Some of the dings against First Solar were out of the company's control, like governments reducing subsidies for solar programs. It also didn't help that Chinese solar outfits Yingli Green Energy
But First Solar has suffered from many a self-inflicted wound as well. Alyce wasn't a big fan of compensation for outgoing CEO Rob Gillette, and the efficacy of the company's products is now being drawn into question: "It's recently come to light that First Solar's equipment is showing some heat-related 'degradation' issues. ... In other words, its equipment may have weaknesses in exactly the types of places mammoth solar farms make the most sense, like sun-scorched desert."
That was enough for Alyce to call it quits on First Solar after suffering about a 70% loss.
Red Robin Gourmet Burgers
Rising Star Jim Royal focuses solely on "special situations" for his portfolio. He's bought into Red Robin on two different occasions, and his reasoning was simple: The poorly run company had been taken over by activist hedge funds that promised to clean house and improve performance.
That effort is clearly showing, as Jim pointed out in summarizing Red Robin's most recent earnings release: "We continued to see strong growth in restaurant-level operating margins, moving from 17% to 19.9%. And same-store sales came in at a strong 4.8%."
So why did Jim sell shares? It all comes down to taxes and the extra weight they'll likely have on earnings: "I'm concerned by the increasing tax rate, which the company projected at 22%-24% for the year, versus 6.8% for 2011. That should really increase the threshold for achieving profit growth in 2012."
Don't cry for Jim, though. Things have worked out quite nicely for him, as his investments in Red Robin served up returns of over 60%!
Finally, Rising Star leader Jason Moser made the first sell for his motley portfolio. He readily admits that selling goes against what he usually prescribes, but the Gap represented a special opportunity.
"When I bought, [Gap] was a company I thought was undervalued," Jason says. The company's most recent earnings showed that sales were up about 6%, and all-important same-store sales were up a solid 4%.
On that news, the company's share price spiked, and Jason believed it was time to part ways: "My thesis has been met. ... there's nothing that separates [the Gap] from somewhere else, other than their brand." The company turned out to be a great investment for Jason, as it was up 36% in under one year.
The Fool's top stock for 2012 and beyond
The Fool's Rising Star stocks are a starting point for your investing endeavors. But they are by no means an end point. The Fool's top analysts have put together a special free report on "The Motley Fool's Top Stock for 2012." I suggest you continue your investing journey by grabbing a copy of this report today, and consider buying shares of this company that you can hold for the long run. The report is yours, absolutely free!
The Motley Fool owns shares of First Solar and Red Robin Gourmet Burgers. Motley Fool newsletter services have recommended buying shares of First Solar and writing puts on Red Robin Gourmet Burgers. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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