Ya gotta know when to walk away

This price chart is an example where you should take profits or ‘manage’ your position.

The stock was a nice performer for our client portfolios in the last part of 2021. In the first quarter of 2022, I trimmed the holding (I thought it was quite prudent to adjust my weighting once the stock doubled) and eventually exited completely.

I thought the stock was fully valued and amongst other considerations I wasn’t a buyer at those new improved levels.

But there was a problem…..

Some investors were a little irritated that I was ‘becoming a ‘trader’ rather than a longer term investor. As I was suggesting we take profits within a 12 month window, this meant some investors faced a taxable ‘short-term’ gain.

When cash is earning you less than 1% and a stock doubles in a very short period of time (perhaps capitalising 3 years of earnings growth within a 7 month period of stock performance)……..you take the profit.

Otherwise, the ‘market’ has its own profound way of solving your tax problem.

Behold………the stock has halved.

Buyers from a year ago, no longer have a tax problem.

I feel a Kenny Rogers song coming on.

November 24, 2021

by Rob Zdravevski


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