Stocks do not have to stay on your watch list forever. In fact, a large watch list of stocks is a waste of time in my opinion. First of all, it takes time to keep track of all those stocks on your list. If you have a number of stocks you actually hold, then you are already spending a lot of time keeping track of those holdings. Add to those holdings the stocks on your watch list and all of a sudden you investment analysis starts to take a great deal of time. I recently culled my watch list for this very reason. Here were the 3 reasons that I used to drop those stocks:
1. Low Dividend Growth or Dividend Cut
As I am primarily a dividend stock investor, I started to cull the list by looking at the dividend growth rates. If there has been no dividend growth or worse, a dividend cut, then the stock was removed from the list. I don’t want stocks that do not grow their dividend on my list.
2. A Decline in Both Revenue and Earnings for More than Two Years
If the company has seen declining revenue and declining earnings per share for the past two years, I torpedoed it! I could have been more harsh and got rid of the stocks that declined in only one year. However, all companies have some difficult times and one year does not a trend make. If the decline happens in two years, then that may indicate larger problems.
3. I Am Just Not Interested in the Stock Anymore
In my experience, an investor must hold some passion for the companies that analyze. If you like the company, it is mush easier to spend the time digging into the stock. If you have no interest then it is hard to spend QUALITY time analyzing a stock. Therefore, if the company held no interest for me then I it was put into the trash.
As you have probably noticed, these reasons for removing the stock from your watch list are not rocket science. Nor do they take a tonne of time to complete. I chose them because they were the easiest and quickest way to decide which stocks to jettison. You may choose other reasons, however I encourage all you investors to have a look at your watch list and decide which stocks really don’t belong there. I think you will find it liberating and an incredible time saver. Now take that saved time and go for a walk with a significant other.