"Paul, I don't understand the HOLD recommendation and would appreciate an understanding of it. I would assume a BUY is a stronger recommendation than a HOLD. After all, we're being told to BUY certain stocks but not buy more of those that have a HOLD rating. I have limited capital, so my thought is since you are recommending stocks with a BUY rating they must be preferable to those with a HOLD rating. So, I would appreciate an explanation of why I should hold HOLD recommendations instead of selling them in order to buy BUY recommendations. Thank you."—R.G.
Paul Goodwin: "You are correct, a BUY rating is more positive than a HOLD rating. I use the HOLD rating when a stock has lost momentum or when something in the news or its chart behavior indicates a threat to its profitability. I use a HOLD rather than selling because very profitable stocks can go through periods of correction or consolidation that increase their risk level, but from which they can eventually emerge stronger than ever. The largest profits in growth investing come from stocks that double for a second or third time, and that's possible only if an investor is willing to be patient during corrections—and so holding a stock during a correction can be a profitable technique."
Paul Goodwin Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of
Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.
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