To evaluate the performance of individual stocks, I create charts for stocks I've owned for longer than one year. The charts present data such as annualized total returns, yield on cost, and year-over-year dividend increases. Underperforming stocks are easily identified in this way.
Lately, I've been adding to existing positions more frequently than opening new positions. I haven't eliminated positions often. My reasons for eliminating positions include dividend cuts and in some cases, mergers and acquisitions.
Now that I'm evaluating the performance of my portfolio (and individual stocks) every quarter, I'll consider eliminating underperforming stocks and, potentially, stocks that have become overvalued following a period of outperformance.
The ability to easily identify undervalued (and overvalued) stocks will be helpful if and when I decide to take action. I have developed a simple way to do so with a variation of my performance charts.Please read this article at Seeking Alpha for details.
Please feel free to leave comments on this article either at Seeking Alpha or here, on my blog. I'll do my best to respond to each comment as quickly as possible.
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