What sell rules do you apply to the Guru Screens?

Every quarter, the portfolios are checked to see which stocks are qualifying for the original screening criteria. We then sell any stocks that are no longer qualifying and replace them with stocks that are qualifying strictly according to the quantitative criteria, while reducing or increasing the position size for any stocks that are still qualifying. All stocks become equal weighted in each portfolio at the point of each rebalancing date. Our tracked baskets are therefore snapshots of the constantly changing lists at a moment in time.

For the sake of simplicity, even if the Guru behind a particular approach suggests different sell rules versus buy rules, at present, we do not apply them. We plan to introduce more sophisticated selling rules in due course. However, this approach is in line with the thinking of, say, Joel Greenblatt envisaged that his Magic Formula portfolio should be rebalanced annually, selling losers one week before the year-mark and winners one week after the year mark (although this guidance relates to specific US tax considerations), while the late quantitative theorist, Robert Haugen suggested that trades should be staggered monthly in 1/12th tranches so that whole portfolio is rebalanced over the course of a year rather than all at once.

The advantage of this kind of systematic rebalancing is that it entirely does away with the thorny issues about which stocks to sell and when. As Greenblatt has noted, when it comes to long-term investing, doing "less" is often "more". Let's say you own a stock that triples, but your rebalancing date is 11 months away. What do you do? You wait! Let's say you own a stock that halves, but your rebalancing date is five months away. What do you do? You wait! It is certainly true that you could miss out some potential gains and duck some losses by not taking matters into your own hands at certain times. But the question is whether you believe in the underlying system or in your own discretionary management skills...