When should you cut your losses on a broken stock?
This is one of the toughest questions investors face. In October 2005, value guru Philip Durell recommended cutting losses on Doral
The company may still represent a distressed value opportunity at the current $8.40 per share price, but even so, I recommend that you sell Doral. I feel sorry for members who have lost money on Doral, but I would be a lot sorrier if I didn't admit it and further revelations caused members to lose even more money.
Today, $8.40 looks like a fortune compared to the $1.41-per-share offer from privately held FPOB Corp. While there is still a chance of a higher counteroffer emerging, the stock looks stuck in the low single digits.
As hard as it might be, selling for a loss is sometimes the right move, especially when management is no longer trustworthy. For more advice on selling, see these Foolish articles:
Despite taking a hit on Doral, Philip's picks are still beating the market by more than 8%. Click here to learn more about value investing.