Reflections On Selling

On selling.

It’s been a while since I’ve posted because of medical problems, but here I am again.

As I wrote over and over again in the Knowledgebase, I feel that selling when appropriate, instead of holding on and hoping for a turnaround, or trying to wait “until it gets back to my purchase price”, is one of the most important things that you can do in investing. Even if the stock does eventually come back three, four, or five years later, because of the opportunity cost.

And I almost never, ever, EVER, sell out because a stock has gone up, although I might trim a little, especially if the position has gotten too large.

I was reminded of this after Bert Hochfeld mentioned Fastly (not a recommendation, just a mention) in a recent article. It reminded me of exiting Fastly a number of years ago. It and Cloudflare had similar products at the time, and after a quarter in which Cloudflare reported seven or eight hundred new customers, and Fastly reported ten new customers in the quarter, I exited. A lot of others did too, but we were literally attacked by a couple of board members who insisted that Fastly had by far the better technology and would win out in the end, and who were loading up on Fastly shares. I don’t remember the exact price I exited at but Fastly had reached a high in 2020 of about $127 and is now at a price of less than $9. (Numbers of new customers above are from my memory and are not exact, I didn’t look them up.

A more recent example was Aehr. I got out at about $38 because revenue growth was crashing and the CEO seemed to be pleading with customers to submit orders. Others saw it differently and decided to stay in and ride it out. The high had been about $53 or 54 but I didn’t care. I couldn’t sell any higher than where the price was when I sold. Aehr is now at about $11, and those highs were just back a little over half a year ago.

Of course, our board was founded based on the Westport fiasco back in 2013 or so. It was a highly regarded company at the time, and recommended as a Buy, but I saw a company with losses that were 250% of total revenue, and gross margins about 30%, and I pointed out on the Westport board that they would have to quintuple their revenue (which was quite unlikely as they only growing revenue by 15% yoy), to break even. And that was if they quintupled revenue without adding any additional expenses like adding additional employees. It was impossible. I was never so attacked as I was on that board for pointing out that their darling company had clay feet. It was roughly $30 per share at the time. Here’s what I wrote about it on the Knowledgebase :

“on the WPRT board, which used to be a MF favorite, when the price dropped from $32 to $25 lots of people felt it was a bargain, and bought more, and at $20 “doubled down”, and “doubled down” a second time at $15, etc. It’s hard for people to see a stock they believe in go down to what they think are ridiculous levels without buying more (it’s at $2.60 as I write in Jan 2020), especially if it’s misleadingly still labeled a “Buy.”

I just saw a current price of $5.60 but found that they did a ONE FOR TEN reverse split in 2023, so an old share is just one tenth of that $5.60, or just $0.56 or 56 CENTS !!!

It was after Westport that people from that board had asked me to start a board of my own and I think this one was started early in 2024.

There’s a huge opportunity cost in waiting it out, even for the companies that do eventually come back to where you could have sold out in the first place. Okay, what is the alternative? Well you could sell the problematic company and buy something that doesn’t have that problem.


I took my position in AXON about ten months ago at about $185 and now it’s at about $304, which is up 64% in ten months. (I’ve also added small amounts on the way up).

I took my position in CELH about seven months ago at about $54 and now it’s at about $83, which is up 54% in seven months. (I trimmed about 10% of my number of shares Friday at $83. It’s still a 17% position even after the trim, and I have no plans for a further trim).

I took my position in ELF about seven months ago at about $103 and now it’s at about $164, which is up 59% in seven months. (And that’s even after a big sell off from a high of $217 because a competitor reported a slow down).

And for the fourth of my big positions, I took my position in IOT about a year and a couple months ago at about an average price of about $19 and now it’s at about $41, which is up 116% in a year and a couple of months. (I’ve added small amounts and trimmed small amounts on the way up).

If I had held on to my problematic stocks, I simply wouldn’t have had the money to have invested as much as I did in these positions. That’s opportunity cost.

And for disclosure, my portfolio is up 20% year-to-date. (19.9%, actually)



I should add the example of Zoom ! In the fall of 2020 it had a high of about $559. It was still growing year over year by huge amounts (200%? 300%? 350%?) but I tried to sound the alarm saying that those huge yoy growth numbers were just history. Zoom had already conquered its entire TAM in a few quarters due to Covid, so sequential growth fell from over 100% at one point to less than 10% in just three quarters.

The stock price has fallen from that $559 to a current price of just $61.



I’m glad to hear you are back! Stay healthy! I agree with your Reflections On Selling and I would like to present it based on my experience as a management consultant. It might help Fools with less experience.

As management consultant we spent a lot of time researching what makes good managers. While there are many successful approaches, there is one common thread and it is simple arithmetic. A good manager is quick to make decisions and recognizes choices that do not work out, I hate to call them mistakes. Quickly the manager comes up with an alternative decisions. In Saul’s case, it’s selling the stock or buying it back. Assuming the manager’s track record is only 50% good decisions, this is how the progression goes:

  • First decision, 50% success
  • Second decision, 75% success
  • Third decision, 87.5% success
  • Fourth decision, 93.75% success

Twiddling about costs a lot of money. If you want to know Saul’s success, this is it, an active and shrewd portfolio management.

o o o o o o o o o o o o o o o o o o o o

When investing in stocks one has to realize that there are all sorts of investors, traders, fund managers, and speculators at work. The stock price is driven by two forces, the company’s performance and market sentiment. One must determine what is at work. The Gartner Hype Cycle illustrates market sentiment very well.

No wonder technology stocks often drop by 50% or more.

o o o o o o o o o o o o o o o o o o o o

Flip Side Alert!

Getting whiplashed trading on crazy but unfounded price swings, achieves the opposite results, losing money real fast. Know you company, know your stock, know where it is in the Hype Cycle.

Denny Schlesinger


That was a great callout of figuring out Zoom has conquered their whole TAM so fast that there was no more room to grow. I remember you were out of large Zoom position very fast after what many considered a decent quarter. You had noticed that they had onboarded almost all the possible Enterprise customers they could already because so many customers signed up in previous quarters.

Still this turned out to be an investment which had a very high return in a short amount of time because of holding shares through those three quarters including that one which I think one analyst called “the greatest quarter in SaaS history”. This shows the power of the approach to get onboard companies when they are accelerating growth and then move that money elsewhere once the growth story changes, slightly for the worse.

The call to get out of Zoom when you did was a good choice in both the short term and long term. Zoom is now a company consistently growing revenue three percent year over year! Their last four quarters of revenue growth were, 3% → 4% → 3% → 3%.

I was a bit slower to react to the slowdown in Zoom and it cost me some. Many of my shares had large gains and I factored in capital gains decisions too much, opposed to reasons which otherwise told me the growth story was over in Zoom.


Yes, I think up until Zoom we thought of growth almost exclusively in terms of year over year, and after Zoom is when we started thinking about sequential growth, which now has become so taken for granted that we can’t remember when we didn’t consider it.



Then there was Peloton, which was a board favorite in 2021 during the Pandemic. The story was that everyone was going to buy an indoor bike and subscribe to a Zoom-like service where they could all bicycle together.

The all time high close was $167. The current close was about $4, which is about 2.5% of the high, or a loss of 97.5% from the high. Just grasp that !

There were plenty of investors on the board who didn’t want to accept that it was over. Just think, if you waited until it was down 50% from the high to “double down” you would have still lost 95% of that additional investment.

Exiting does pay off. And if at sometime the stock does bounce back while you are out of it, so what? You can’t be in every stock in the market that goes up. As I stated over and over again in the KnowledgeBase, what matters is NOT what the stocks that you sell do afterwards, but what the stocks in your portfolio do.