I guess I gotta go really looooong

So I added AYX, SHOP, and NKTR about at the highest they could possibly be. Down 11%, 18%, 10% as of closing today. Enough negative to put my ytd at 1.9%.

I added them because this group was talking about them and I needed to do away with all sorts of little positions and truth be told, they sounded great. I was too late, but also, I didn’t study them enough.

Do I sell and take that huge a loss or do I just ride it out? How long is long?

2 Likes

Oh come now…

I just joined the group as well… ANET,AYX,MDB,NKTR,NTNX,NVDA,SHOP,SQ… all are down relative to where I started… some as much as 13%…

But… these earnings reports are simply AWESOME. Just because the market reacted poorly… heck, consistent earnings reports like these… these prices will seem cheap in years to come. Market reaction is a short term thing… consistent home run earnings reports and growth is what I want… the price will work itself out.

From my point of view, this is simply a start up transient that will pass in time. Picture the new guy a year from now that says… Darn, wish I would’ve bought back then… I was too late.

Just my two cents…
Mark

23 Likes

There is also a thing called “lowering your cost basis” by buying more of a company after the price has fallen. If you still believe in the companies you bought––their value––then why not get excited about the opportunity to own more of their shares at a discount? When your favorite bourbon goes on sale at the local liquor store, is that upsetting? Why?

It’s often useful to think like an owner of a company rather than a trader with little loyalty to anything besides short-term greed.

Hugs,

Monkey

9 Likes

Do I sell and take that huge a loss or do I just ride it out? How long is long?

Well, AYX has doubled in the last year, NKTR is up 4X in the last 6 months, and SHOP is up
6X in the last 2 years.

If you look at stock charts going back 150 years, it is not at all uncommon to see 50%
pullbacks, even in the best performing stocks of all-time such as AMZN, WMT, IBM, MCD
and others. Heck, NFLX went from $38 down to $9 in 2011.

Am I saying this will definitely happen? Absolutely not. Am I trying to scare you out of your
positions? No.

Just gently suggesting that you only invest an amount of money where you are able to sleep
at night, cognizant of the fact that major draw-downs are a reality, even for the best growth
stocks.

10 Likes

Do I sell and take that huge a loss or do I just ride it out? How long is long?

Buy higher and sell lower is not good but there is an important lesson in it. Our instincts were not designed or developed to be successful in the stock market but in the open savannah where you chase your pray until you run it into the ground exhausted. Do that in the stock market and you buy too high.

The real difficulty is that there is no telling when the stock is about to reach a high and reverse course. I had that happen to me with The Lending Tree. After a great earnings report it crashed from 337 to 239, a drop of almost 30% before reversing to 265, all this in just seven trading days. Buying high was unfortunate but selling at the low would have been stoopid.

Don’t ask whether you should sell, ask if the company and the stock are still investment quality. The Lending Tree is a perfectly good business that I happen to have bought at too high a price. But my bad timing has zero influence on the quality of the company and the stock. Maybe I need to become a better timer.

Ask yourself if AYX, SHOP, and NKTR are quality investments. Base your decision on that!

Denny Schlesinger

20 Likes

MoneySlob,

“Do I sell and take that huge a loss or do I just ride it out? How long is long?”

I believe you are focusing on the wrong thing.

Right now, those positions are worth what you can sell them for. Investments are always worth that as a matter of fact.

What they were worth yesterday is somewhat immaterial.

Questions to ask:

  1. What happened? Why did they drop? Is the general market/panic level affecting them? Over zealous analysts?

  2. What will happen with them going forward? If I sell them, is there something to buy that will “certainly” do better? Switching horses, if done incorrectly, can cause you to fall off. You sell a “loser” and buy another one.

If there is a better place for the money, then move it. However, if you are not certain, it is normally best to leave it alone.

Something to consider: Forget the notion of “waiting until it recovers.” That is not an investing strategy. It is simply fear or embarrassment in selling an investment for less money than you bought it for. In a taxable account, it matters but not as much in a retirement account. If there is someone that has never invested in a losing position, they are probably lying.

Does that help you?

Gene
All holdings and some statistics on my profile page
http://my.fool.com/profile/gdett2/info.aspx

5 Likes

Thanks you guys. Those are pretty darn good stocks. I’ll just stick with them. I guess I got spoiled 2017 listening to MF suggestions. Oh well, 2018 ain’t over yet.

2 Likes

Study them as much as you feel you need to then do this one thing: Decide if you would still buy them. If the answer is yes, don’t sell. If the answer in no, sell them.

Peace,
Dana

8 Likes

So I added AYX, SHOP, and NKTR about at the highest they could possibly be. Down 11%, 18%, 10% as of closing today. Enough negative to put my ytd at 1.9%.

Do I sell and take that huge a loss or do I just ride it out? How long is long?

Money:

There is always a price that is too high to pay for a particular stock. This was the gist of the P/S post a while back.

There is a very important distinction between the storyline for a company and the storyline for its stock…2 separate but related issues…rarely are both in synch.

Also, if you intend to be in stocks, a horizon of 5 months is way too early…5 years horizons are more commonly accepted IMO…not necessarily in the same stock.

As an aside, the high P/S portfolio I posted here is underperforming the lower P/S portfolio by about 5%.

5 Likes

Decide if you would still buy them. If the answer is yes, don’t sell. If the answer in no, sell them.

Good test!

Denny Schlesinger

1 Like

all are down relative to where I started… some as much as 13%…

…these prices will seem cheap in years to come. Market reaction is a short term thing… consistent home run earnings reports and growth is what I want… the price will work itself out

What’s your strategy when [not if] they go down 50%, in the short or long-term?

1 Like

Pretty sure this little saying is not original to me, but it has been stuck in my head a little the past few days (I think I might be coaching myself a bit):

Time in the market beats timin’ the market.

You could word it several different ways, but the similarity phonetically of time in vs. timin’ is the key.

If somehow that is original to me, I will gladly take credit, but I probably heard it elsewhere.

-volfan84

3 Likes

What’s your strategy when [not if] they go down 50%, in the short or long-term?

You seem convinced they’ll go down… okay… I think they have more runway. That’s cool.

People said the same thing about AMZN, GOOG, NFLX… and they all DID in fact go down 50% or more (so you could well be right)… and they kept producing great earning reports and the price caught up (so I could well be right at the same time).

I choose companies based on great earnings and growth… and I intend to hold them as long as those great earnings reports continue. If something changes in the earnings causing me to change my thesis in the investment, I’ll sell, otherwise I’ll hold.

I think people forget a fundamental fact. Return-Risk-Volatility go together. If you want high return, you are likely to incur higher risk and higher volatility. Just goes with the territory. I’m not particularly bothered by big surges up or big surges down. That’s just the volatility that goes with the territory. I think trend points on a quarterly frequency tell a more accurate story than daily chaos.

Just my opinion… everyone’s got one.

M

4 Likes

I added them because this group was talking about them and I needed to do away with all sorts of little positions and truth be told, they sounded great. I was too late, but also, I didn’t study them enough.

The bottom line lesson here is this is exactly why no one should ever buy something simply because anyone else, no matter how successful that anyone else is, told them to. At the end of the day it is y/our money. If we don’t feel deep-seated conviction for each stock we own, which can only come through doing the work, and being true to one’s own clearly established guidelines, we will inevitably be shaken out when the **** hits the fan. And we will be 1000x more likely to sell low.

As much I crave having vast wealth spoon fed to me by Saul, the Gardners and a benevolent fate, it just doesn’t work that way. That’s why I’ve posted a few of these get-to-know-the-leader posts. For me, that is a key criteria. We all must have our own.

Fool On,

BD

25 Likes

Do I sell and take that huge a loss or do I just ride it out?

Hi Money. You have to make your own decisions, but I’m not sure why you are considering selling those particular stocks. Because you bought them higher? That’s the only reason you give in your post, but you must have some other reason that made you change your mind about them. Did you hear any bad news about them since you bought them? Did they issue any pessimistic press releases? Has there been any company-specific bad or threatening news about them since you bought them that has caused you to change your mind? Or do you just have a bad intuitive feeling about one or more of them? (I personally have certainly been known to act on intuitive feelings, and even sell out of stocks because of bad feeling, so I can’t argue with that, but I’m just asking if you have any actual reasons).

How have I handled this situation? That’s a good question.

I bought Nectar at $103 and it soon dropped down to $82, and it never occurred to me to sell it, even though it was down 20%. I was only wondering if I should add at that point but I decided not to because I already had a big enough position, and I considered it as a speculation of sorts.

Alteryx dropped from $38.50 to $30.65, also down 20% on news that I evaluated, read about, and then decided didn’t warrant the drop, and I added a little right near the bottom. Now this wasn’t down from where I bought it I admit, but from where it had been. But I was buying the company, not the stock price.

Shopify, your third stock, has had several 20% drops since I bought it, but as of last Friday it was at 470% of where I bought it. I did trim it when it got to be too large a position, and I have trimmed it at other times when I needed small amounts of cash, but it’s still in 3rd place at about a 12% position.

How long is long?

Certainly longer than a couple of months.

By the way, as I’m writing this I see that Shopify is up $9 today, or 7.5%, AYX is up 2.75% today and Nectar is up 2.9% so far today. I hope you didn’t sell them all at the bottom.

Best,

Saul

22 Likes

You seem convinced they’ll go down… okay… I think they have more runway. That’s cool.

People said the same thing about AMZN, GOOG, NFLX… and they all DID in fact go down 50% or more

Of course they’ll go down a lot, EVERY volatile tech stock does. As you note in the following sentence.

and they kept producing great earning reports and the price caught up

and what about the 100s of tech stocks that stopped producing [or never started] great EPS and dropped 50-99.99%? NFLX will undoubtedly have a huge drop again as well AMZN and probably Google and I own 2 of those in large sizes. Read Saul’s posts about losing 68% in a single calendar year.

I think people forget a fundamental fact. Return-Risk-Volatility go together. If you want high return, you are likely to incur higher risk and higher volatility.

Your assertion is prima facie false, as amply demonstrated in the Journal of Finance way back in 1996, and everywhere in the public literature by 2007-08.

The worst peforming stocks have the highest volatility, ceteris paribus. This is partly because of the ‘jump-to-zero’ function known as bankruptcy.

The lowest vol stocks have been found to earn an extra 2% CAGR, over time, with 75% of the risk of the market. A name like Clorox is a classic example that has done way better than that.

Source: Falkenstein, Eric G., Preferences for Stock Characteristics as Revealed by Mutual Fund Portfolio Holdings. J. OF FINANCE, Vol. 51 No. 1, March 1996.

12 Likes

This is partly because of the ‘jump-to-zero’ function known as bankruptcy.

So those companies would be good to try to avoid.
Got it.

In all honesty, did the analysis show the results when removing the companies that went bankrupt? I’m not suggesting that everyone can avoid picking companies that go bankrupt, but I would be interested to know the analysis without those companies included.

Thanks,
A.J.

1 Like

I added them because this group was talking about them … I didn’t study them enough … Do I sell and take that huge a loss or do I just ride it out?

Seems to me like you bought because you felt others were having success with the stock and you’re now wondering if you should sell because the stock price has fallen.

If you actually follow this board for a while you will find that the most successful folks that contribute to this board don’t actually pay a lot of attention to stock price. The focus is on the fundamentals of the companies: the business model, the management team, the moat, etc.

Ask yourself what has changed with respect to the businesses you have invested in. Have they made a stupid acquisition? Have their customers deserted them? Are expenses consistently growing faster than revenues (that will be hard to determine in 5 months)? Are there significant inexplicable changes in the executive management team?

Stock prices can and do behave erratically, especially in the short term. Look at the business. Even the political landscape is less of a factor than one might think. Business goes on irrespective of tax rates, employment numbers, inflation rate, etc. It takes a major political/economic event followed by a sustained change in the economy to have long term impact on business.

4 Likes