On taking profits.

Some people seem determined to “take profits” when a stock has gone up. I have consistently counseled against that practice. For example, yesterday in the premarket, after the best earnings report ever seen by mankind, some “profit takers” sold shares to me down $10 from the previous close, at $198.50. The stock closed the day up $25 from that price that they sold to me at. I sell out of companies too, but I sell out when something is WRONG, not when everything is beyond expectations.
Saul

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I sell out of companies too, but I sell out when something is WRONG, not when everything is beyond expectations.

To paraphrase Buffett, selling your most successful company is like the Chicago Bulls trading away Michael Jordan because he’s too good.

It’s completely illogical.

Chris

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Some people seem determined to “take profits” when a stock has gone up. – Saul

To me, it is irrational behavior:

You have invested in a growing company to make money. Check.

OK, your company is wildly successful. Check.

The share price has gone up in response, just as you hoped. Check.

New all time high! Check.

"Some people: “I’m going to sell now to preserve those profits.”

Me: HUH? WHAT? Do you think the company is done growing?

“Some people”: No, I think it’ll be a lot bigger in the future!

Me: So it’s a good investment?

“Some people”: You bet! I’m going to buy again. Later. Because now it has risen so much it might drop.

Me: Duh! Drops are part of it. Timing and extent not predictable. When are you going to buy back in?

“Some people”: Soon…


Like I said. Irrational.

Rob
Rule Breaker / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Some people seem determined to “take profits” when a stock has gone up. – Saul

To me, it is irrational behavior: – Rob

Yes, and if it wasn’t for irrational behavior, stock prices would move up and down more consistently, and it would be harder to get good deals on successful companies, such as being able to buy ZM at $113 in early April versus $159 in late March or at $135 in late April after $169 a week earlier.

Of course, buying at any of those prices looks good now. As Saul and others on this board emphasize, if ZM continues to grow, then in a few years, no one should care if they bought at $113 or $159 or $198 or even at $220.

Those who sold after hours at $198 can now buy back in around $214 (whoops) since the price is down today or they can wait and hope for more of a drop which may never come.

To illustrate irrationality, on another board, someone keeps inquiring about whether it’s a good time to invest in Luckin (LK), a Chinese company whose stock price has plummeted due to fraud in reporting numbers and that faces the possibility of delisting on the U.S. stock exchange. Several have mentioned that there are literally thousands of better options for investment dollars right now. I can’t imagine why anyone would gamble with a company like that instead of companies discussed on this board or even better known standards such as AAPL, AMZN, and NFLX, but this person replied

Is there any solid data which say to neglect the rally ? Luckin is up today 20%

Based on his replies, I get the impression that instead of trying to learn about how to evaluate companies (as I have from reading this board), he is looking for someone to confirm his belief that buying a “cheap” stock at $2 will lead to massive profits. If someone like him had bought ZM last year, they might well think it’s time to “take profits” in an “expensive” company like ZM and buy a “bargain” at $2 or $3. Such thinking is part of the irrationality of the market.

[Note: I used Luckin (LK) as an example of market irrationality, not as a company we need to discuss on this board b/c it does not fit the criteria, and there are other boards people can discuss it on if they wish, so please don’t discuss LK’s prospects here].

All the best,

Raymond

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Saul they are taking profits on Crowdstrike also. Now Crwd beat on Revenue and earnings and guided to a raise on Revenue growth to 76% next quarter, which they will beat. How many companies out their are even giving guidance? Even for the next quarter? But not only that they are giving Guidance for the full year.

Burt Podbere:

We continue to expect to be non-GAAP operating income breakeven in the fourth quarter. In Q1, we converted our marketable securities to cash and as such do not expect to report material interest income for the remainder of the year. And lastly for cash flow, given the timing of expenses and seasonality of new hires, we expect to see slightly negative operating and free cash flow in the second quarter. And we are maintaining our guidance to be operating cash and free cash flow positive for the full year. For the full fiscal year 2021, we currently expect total revenue to be in the range of $761.2 million to $772.6 million, reflecting a growth rate of 58% to 60% over the 2020 fiscal year.

Non-GAAP loss from operations is expected to be between $19.2 million and $11.1 million. We expect fiscal 2021 non-GAAP net loss to be between $18.1 million and $9.9 million. Utilizing weighted average shares used in computing non-GAAP net loss per share basic and diluted of 220 million, we expect non-GAAP net loss per share to be in the range of $0.08 to $0.05.

Andy

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Often people here post about “trimming” as a particular stock becomes overweighted in ones porfolio. This (usually) occurs when it is soaring. Trimming a position is not that far from taking some profits.

Trimming is also close to what a buddy of mine often counseled when someone would moan “I don’t know whether or not to keep XYZ”. He would just say “sell half”.

Dave

Greetings,
I started “trimming” on stocks that I had picked without MF recommendations and trimmed away all of my indexed ETF’s. I now have 63 stocks, almost all MF recommendations / Best Buys.
I have now given up “trimming” and selling to “let 'em run”
Have a great day!
Richard

With respect to whether or not you should “trim” your profitable stocks. I don’t think you can make a blanket statement about whether or not it is always good or bad.

My best personal example of this is with Cisco stock. Look at a chart graph that goes back into the 1990s. I was a holder at that peak in 2000 with some pretty significant profits….

Question - would it have been a good idea for me to “trim” my position at that point? (Hint - it is 20 years later, and the stock price is still below that ATH.)

To trim or not to trim is a question that needs to be answered on a case-by-case basis based on a whole bunch of factors.

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I agree when you say, “I sell out of companies too, but I sell out when something is WRONG, not when everything is beyond expectations.”

There may be other reasons though. I sold some because my portfolio is way out of balance because ZM has gone up so much. Not that I am complaining, but there are some other companies that I want to dip my toes into.

Nothing wrong with ZM, but I don’t want my whole portfolio to be ZM.

By the way, I never would have found ZM at the price I did without this wonderful and amazing board. Thank you.

Yes but we are not taught that way. I was playing Netflix like a fool taking my 25 percent profit. Letting it run. Going back in for my 25 percent profit. Before I know it I could have been up thousands of percent. Now I’m almost 40 and wasted what may have been the best bull run of my life. Wish I knew of this forum in the early 2000’s when I started my scottrade.

Luckily I am in a position to add like crazy cause of my career situation has improved.

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Thanks for this thread. I have been taught the “Take your profits” position growing up, so this reminder is so valuable as I am a living example of it. But, it is such a hard thinking to get rid of. lol.

I bought CRWD back at $38 earlier in March and sold it for profits at $50…thinking I can buy it on the dip in the future since the world was coming to an end…but it kept on rising. lol. Finally, I purchased it again but at $98. OUCH. Events like this is helping me retrain my mind and thinking!

I am learning so much from this forum, and I appreciate all the great knowledge on here. God bless. J

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