Transcripts

How Wall Street Works - When is it time to Sell

SUSIE GHARIB: Buying a stock is one thing, but how do you know when it's time to sell? Karen Blumenthal followed the stock of Starbucks for a year and wrote about it in her book "Grande Expectations: A Year in the Life of Starbucks' Stock." She says some there are signs that may indicate when a stock's price is peaking and when it may be a good time to sell your shares.

KAREN BLUMENTHAL, AUTHOR, "GRANDE EXPECTATIONS: A YEAR IN THE LIFE OF STARBUCKS' STOCK": Growth is what moves Wall Street. They're always looking for who's going to grow faster because then the stock price should grow faster. And that's why Starbucks just keeps opening more and more stores; that's why they've moved into more and more countries; why they're selling new Paul McCartney CDs and new kinds of drinks that they want to build those sales and keep that growth going. When the same store sales get a little sloppy or a little bit sluggish, then there may be problems in the core of the business and that could be a problem.

KANGAS: Right. Now you point out that every stock trade involves one person who buys and another who sells. How is it that two informed investors can reach opposite conclusions about the same stock?

BLUMENTHAL: It's an amazing thing. I interviewed a short seller, somebody who bets that the stock will go down and he was looking at the same numbers as the guy who had a big mutual fund who was sure the stock was going to go up and a lot of it is in how you interpret the numbers. I mean, one saw consumers getting nervous about spending. The other saw consumers are addicted to their coffee. You know, you get those different points of view and that's what makes the stock market move.