Selling winners that have had a run?

[SaulR80683]

I would like to learn from Saul and let go of winners that have had a run.

Hi Flygal, I’m afraid that is a misinterpretation. I definitely DON’T sell winners that have had a run (not as a policy, anyway). I only sell if I have a specific reason (as I did when KRED was up 70% in one day). Here’s a relevant quote from the FAQ page modified slightly to bring it up to date:

* I tend to sell a piece if my position has gotten too big for me to be comfortable with. (Usually, that means more than 10 to 12 percent of my portfolio. However, years ago when I was still working, and could add funds to replace losses, I seem to remember letting rare positions get to 20% if I was in love with the company).

I tend to sell a piece if I feel the price has shot up wildly. I did that with TSLA, selling half (at the time). On the other hand, BOFI had gone straight up for 5 months since I bought it, but my position wasn’t too big, the rise wasn’t too fast or with lots of hype, their revenue and earnings were moving up, and the PE was still well under 20… so I added multiple times along the way. In other words I don’t sell just because something is going up.

I tend to sell a piece if I feel the story has changed. I’d had IPGP for a long time but they seemed to be turning into a slow grower, so I’d sod out. I sold out of AAPL as it seems to be becoming a value play instead of a growth play. I sold out of ISRG because of all the bad publicity with the head of the GYN Association saying it was overused and of no additional benefit. While they will continue to do well I figured that hospital boards would hesitate longer before buying a new machine, and with a high PE, a slow down would drop the price (which is what happened afterwards).

In general when I’m thinking of selling I seem to usually sell a little first while I’m evaluating, then decide for sure what to do. I might even decide to buy back the little piece I’ve sold if I reconsider.

* Trading in and out is self destructive. You remember the trades where you made a few dollars and it encourages you, but you forget the losses. Never take a position to make a few percent. You should be investing in stocks that you can see at least tripling, if not going up ten times.

* I always buy with the idea of holding indefinitely, never with the idea of a short holding period, but in practice I guess my average holding period is six months to two years. I sell when I’ve fallen out of love with the company or I think the story has changed, or I think that the price has gotten way out of line.

By the way your remarks about typing really are interesting from a gender point of view. I understand your mother telling you not to learn to type because it would pigeon-hole you. On the other hand, I type with ten fingers and have always felt it to be a valuable skill, but being a male I wasn’t in the same danger you were in. I don’t know how I’d get along without it, writing books and articles. Maybe your mother should have told you to learn to type but NEVER let anyone at your workplace know that you know how.

As an interesting aside, I’m always amazed my my “muscle memory”. If you were to ask me where the letters are on the keyboard I truly couldn’t even tell you one, my brain doesn’t know, but my fingers know and find the correct keys when I’m typing. A mystery.

Saul

For FAQ’s and Knowledgebase
please go to Post #2848

[buynholdisdead]

As an interesting aside, I’m always amazed my my “muscle memory”. If you were to ask me where the letters are on the keyboard I truly couldn’t even tell you one, my brain doesn’t know, but my fingers know and find the correct keys when I’m typing. A mystery.

I agree Saul. Learning to type was one of my best decisions even though it was made with ulterior motives.

Andy

[AlanK]

I would like to learn from Saul and let go of winners that have had a run.

The concept that a company with a stock that has had a good run is due for a fall is based on several incorrect assumptions.

The stock market in the end is a means of measurement of a company’s value. Why should a well run company be “due” for a run of bad management?

It assumes that if a company has been “overpriced” by the market that you can tell with some degree of accuracy when its price will be “corrected.” There are reams of evidence showing that this is almost impossible. Trying to time the market both as a whole and with individual stocks is one of the primary reasons most investors underperform the market.

If you looked at a student with a run of straight A’s, would you expect them to be “due” for a C?
If an athlete has routinely been winning by large margins if their story hasn’t changed is there a compelling reason to believe they are “due” for a few total failures?

If I’ve learned anything from the Motley fool it is to look for and invest in extraordinarily well run companies with a big moat around their business and that are always striving to stay ahead. Preferably they are big disruptors in their sector. Buy them and hold on for the ride while keeping enough money available to weather the usual ups and downs of the market for several years. If you look at the charts of Neflix and Starbucks can you honestly say you could have know when to jump in and out of the market?

[SaulR80683]

The concept that a company with a stock that has had a good run is due for a fall is based on several incorrect assumptions. The stock market in the end is a means of measurement of a company’s value. Why should a well run company be “due” for a run of bad management?

It assumes that if a company has been “overpriced” by the market that you can tell with some degree of accuracy when its price will be “corrected.” There are reams of evidence showing that this is almost impossible. Trying to time the market both as a whole and with individual stocks is one of the primary reasons most investors underperform the market.

If you looked at a student with a run of straight A’s, would you expect them to be “due” for a C?
If an athlete has routinely been winning by large margins if their story hasn’t changed is there a compelling reason to believe they are “due” for a few total failures?

Hi Alan, Welcome to the board. You gave a really nice way of thinking about it. Thanks for your insights.

Saul

[Mykie]

By the way your remarks about typing really are interesting from a gender point of view. I understand your mother telling you not to learn to type because it would pigeon-hole you. On the other hand, I type with ten fingers and have always felt it to be a valuable skill, but being a male I wasn’t in the same danger you were in.

Saul and Flygal,
Here here…I learned to type in high school. When I was Mrl. business man with a private secretary, I did at least half my own memos since it was faster as I could create and type at the same time.

My brother always wished he had learned to type too.

So teach your boys, teach your girls but as you say, undercover.
Mykie
35 CPW was my best speed and so I was protected from becoming the typing pool donkey.

[XMFFlygal]

Saul, On the selling - thanks for the correction. I keep reading what you say but I am trying to find a way to apply it to my own investing so please keep talking about it. I love to discuss with others why they choose to do something, I learn so much from the thought process.

As to the typing, I had a secretary when I was Chief of staff and then again as an engineering manager; so I tended to write longhand with a legal pad. I think better with pen and paper and give it to my secretary. And I left work in 1987.

I took many years off of work because my youngest was diagnosed with autism at two. There were a dozen years of: physical therapy, occupational therapy, speech therapy, EEG biofeedback, you name it- we did it and it all took a lot of time. She is a student at Santa Clara University studying biotechnology and microbiology, she wants to go into medical research. She is fine now, but I never returned to work in order to coordinate her care.

I have a shared secretary now as an elected official. And my husband does power point and stuff like that for me. So I am not really tech literate and I write like an engineer: never use a complicate word when a simple word will do, write for clarity and simplicity…

My to do list has been too long for a long time, typing never made it to the top of the list. And now I have deferred it for so long that it has become irrelevant. IF you use a Mac and push “fn” twice a little mic pops up, on and iPad the mic icon is on the keypad. With a little practice it eliminates the need to type. It is not actually Siri, but I think it is the same speak recognition part of the Siri software.

I love Siri- just hold the button and ask “who is in the lead in Major League baseball?” she tells me today that it is the A’s. Actually they are tied with the Angels, but she knows I am always asking about the A’s scores - so she gave them the benefit of the tie. Which will be settled tonight starting at 5pm.