- Cutting losses. Get out and avoid the temptation of thinking you can win your money back
Thanks for posting your thoughts. I am not sure if I agree with this … maybe a different angle would be to reassess your losses and determine if there has been a fundamental shift in the business, economy, competitive landscape, etc. and then make the decision. Examples from some stocks I have owned for a number of years and have down the up down and up trend.
Select Comfort - owned before the 09 and most of my purchases were in the 20’s (not a large position), this crashed and burned down to under $1. Street didn’t think it would make it. Didn’t have a lot of debt and was a matter of time for economy to rebound - patience - bought more at $1 and sold out about six months ago for $30.
Exelixis - had great portfolio of lead drugs, one of their first that they thought would get approval, didn’t, stock got hammered, kept holding, looked at rest of pipeline (which was very deep for biotech) and decided to purchase more and kept adding in the $3 dollar range. Still in it, around $21 bucks depending upon the day.
EMC - bought sometime around 1981, went up fivefold, then bought Wang Computers, then street killed it for the purchase and that it was not a smart acquisition. Sold out. Turned out street was very, very wrong and was one of my worst “sold it but still made money at the time” quotes. And yes, I do know what those shares would be worth today.
Netflix - we all know this story. Got clobbered multiple times, people said to sell, MF was one of few companies that supported the new “streaming” model. Can you actually think of sending in an envelope and get a movie today? But at the time, people thought it was crazy b/c it was a new business model, content wasn’t deep, etc.
Now, I certainly have had some investments where the company was doing things well and things changed and the stock price declined immensely, as well as a couple that went bankrupt over the years, but I would of lost out on more if I had sold all that had substantial losses at one point in time.
I forget the exact stat but it’s something like 80% of stocks, at some point in time, will lose 50% or more of their value. So if you sell at that point, you will certainly have large losses. but if you can analyze the situation and make a solid assessment, you sure can find some diamonds.
Just another humble opinion to consider.
Sox nation