Those of us with a large number of companies who are learning things on this board all find we have a resistance to selling down to a smaller total count of holdings. Assuming that you reinvest the proceeds from selling out a position, your total invested capital doesn’t change, only the allocation changes.
I won’t call it “advice” that’s sort of a loaded term, let’s just call it some thoughts based on own experience. And remember, what I’ve got to say aren’t laws like gravity, they’re notional heuristics.
You might feel like having over $XXX invested in a company is just too much. But based on the numbers you provided, let me assure that it’s not a ton of money as far as the market is concerned. Take a look at the market cap for your largest holding and figure out you’re percentage of it. You’re in the teeny-tiny range - so am I. I’d venture even Saul with his 300 x gain on his portfolio is also in this same range with his largest position. You are not going to move the needle on any of your holdings no matter what you do.
First thing is remember that you invest more than money in a position. You invest time - your time, as an older person I am all too aware that this is the most valuable asset I’ve got, and once spent, it is irretrievably gone forever.
I’ve found that it takes close to the same amount of time to stay informed about a company I’m invested in irrespective of how big the company is or how much I’ve got invested in it. OK, some companies generate more press than others, so you need to pick and choose what you’re going to read. For example, I ignore almost all the drivel posted on Seeking Alpha. Whenever you see an article titled “Company XYZ Should …” you can be very confident that you have not missed something important when you elect not to read the author’s opinion about what the management of a given company should do. Somehow I find it really hard to imagine Tim Cook (or any CEO) perusing SA in order to figure out what he should do.
But aside from filtering what you’re going to pay attention to, the most important filter is to limit the number of positions you’ve got. If you hold less than a 3% position in any company that you do not intend to build into a larger position, sell it. Reinvest the funds into a position your building.
The harder calls are the 3% - 10% positions. You’re going to want to keep some of these, but which ones?
I’ve sold some fairly large position of companies I really liked that had performed quite well. SBUX for example, I had about 7% of my portfolio in SBUX, I had accumulated this position over a few years. Altogether SBUX was up about 50% for me. But when I asked myself why I had such a large position, the answers I came up with were things like:
- The stock price had gone up faster than the market, I felt like it would continue (momentum theory of investing).
- I live in the Seattle area, I like to invest in companies headquartered in the Northwest.
- Howard Schultz (CEO) seems like really good guy. He treats his employees with respect, pays them pretty well and seems trustworthy.
- I’ve owned SBUX longer than most of my holdings (this is a variant of the buy-and-hold philosophy).
- TMF recommends and seems to really like this company. I subscribe to some TMF services because I think they provide good recommendations.
- I personally like the product. And more importantly, so do a lot of other people - every time I go to a Starbucks store either here or in China the place is crowded and I have to stand in line.
- Etc . . .
These aren’t all bad reasons to invest in a company, but they’re just not sufficient. You might have noticed there are no financial reasons in that list. If I continued and provided more of my reasons for being invested in SBUX that omission would still be evident.
When I looked at it with a green eyeshade, SBUX didn’t look so great. They sport a PE in the mid 30s - that’s tolerable if there’s strong growth to support it, but SBUX has a 12 month TTM earnings growth of around 16%. They have a Saul percentage (1YPEG) of 2.23% (ouch!).
It felt a little like a divorce: I love you but . . . er, um . . . well honestly, I find some other companies more attractive, I won’t forget the good times we had together. I can’t say you treated me badly. But, but . . . (with a tear in my eye), but I have to move on. It’s over.