Streetwise: What should you consider selling?

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Unfortunately, Wall Street's supercilious attitude is upended only by its unvarnished self-indulgence. Moreover, the financial largess that now floats freely within the Temples of Wall Street is unlikely to ever make its way to Main Street.

Which brings us to the topic of when to sell.

Too often the subject is exploited with generalized and often erroneous terms such as, "the market is going up, sell," or "the market is going down, sell."

Yet, inflation remains benign and interest rates are likely to continue to remain low, according to recent Congressional testimony by Federal Reserve Chairman Ben Bernanke. Add in an improving economy and it all points to a continuing rise in equity prices. Furthermore, Goldman Sachs wrote in a note to clients Monday that it sees the S&P 500 at 1,750 by the end of the year and expects a 12-month rally to 1,825.

Let me put it more succinctly: The cookie tray is going around, so grab a handful because you do not know when or if it is coming around again. At the same time, deciding when and what to sell is generally an investor's most vexing decision.

Given that it is Memorial Day weekend, may I once again suggest you contemplate the words penned over a century ago by Catherine Lee Bates in "America the Beautiful." She wrote, "Confirm thy soul in self-control."

So, what should you consider selling? Despite its return from the dead and a dramatic increase in its intrinsic value to $129, as compared to a recent share price of $54.48, Deckers Outdoor (DECK) is a sell candidate and would have to show me a lot more love before I would take another run at the stock. Aside from Coach (COH) and Tiffany (TIF), companies dependent on fashion trends require caution.

McDonald's (MCD) needs better operating and net earnings performance. The same applies to General Electric (GE). Both are sell candidates. To see why, look at the three-month share price performance of both companies as compared to the S&P 500 index.

Linn Energy (LINE) is certainly a possible sell candidate. In the first quarter, Linn reported a 69 percent year over year increase in production from 471 MMcfe to 796 MMcfe (One million cubic feet of gas equivalent.) Linn increased EBITDA (earnings before interest, taxes, depreciation and amortization) by 18 percent year over year from $302 million to $356 million. It reduced lease operating expenses 26 percent to $1.24 per Mcfe (one thousand cfe) versus the year earlier figure of $1.67 per Mcfe. This is the mark of a well-run company.

Linn also announced that its proposed stock-for-stock merger with Berry Petroleum Co. (BRY) had received regulatory approval. It now expects this merger to be completed by July 1.

On the other hand, one half of Linn's distributable cash flow came from hedging gains. Barron's recently dissed the stock, with the conclusion that it is overpriced. However, there is that tempting 8.7 percent dividend.

yourbiz

Lauren Rudd is a financial writer and columnist. Write to him at LVERudd@aol.com


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