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1/ When to sell (thread)
Selling is harder than buying
I rarely sell, but that doesn't mean I don't ever
Here are the 11 reasons I will sell
Selling is harder than buying
I rarely sell, but that doesn't mean I don't ever
Here are the 11 reasons I will sell
2/ Thesis Busted
If I was wrong about the company, I will sell
In the past, I've been wrong about:
+Brand deteriorates $UA
+Moat $GRUB
+Outside forces $KMI
Other reasons:
+Company being disrupted
+Management can't execute
+Legal rulings
I was wrong = sell
If I was wrong about the company, I will sell
In the past, I've been wrong about:
+Brand deteriorates $UA
+Moat $GRUB
+Outside forces $KMI
Other reasons:
+Company being disrupted
+Management can't execute
+Legal rulings
I was wrong = sell
3/ Account Irregulatires
If I can't trust the numbers, how can I make ANY decisions?
There's NOTHING that $LK can do to convince me to buy now. That company is dead to me forever.
If I can't trust the numbers, how can I make ANY decisions?
There's NOTHING that $LK can do to convince me to buy now. That company is dead to me forever.
4/ Mega-acquisition I don't like
In general, acquisitions destroy value and distract management
Relative size is important
$AAPL buying $10 BB company = no big deal
$3 billion company buying a $2 billion = a VERY deal
$LVGO / $TDOC mega-merger gives me pause, for example
In general, acquisitions destroy value and distract management
Relative size is important
$AAPL buying $10 BB company = no big deal
$3 billion company buying a $2 billion = a VERY deal
$LVGO / $TDOC mega-merger gives me pause, for example
5/ Thesis complete, with no compelling second act
If a company captures its market potential with no optionality, I will move on
Signs:
+Organic revenue growth <5%
+Profit growth <10%
+Market cap HUGE relative to opportunity
I will sell/trim to buy opportunities I like more
If a company captures its market potential with no optionality, I will move on
Signs:
+Organic revenue growth <5%
+Profit growth <10%
+Market cap HUGE relative to opportunity
I will sell/trim to buy opportunities I like more
6/ Culture Deterioration
+Glassdoor rating plunge
+Leadership transition isn't working out
+Sudden management shakeup
Hard to see in real-time!
+Glassdoor rating plunge
+Leadership transition isn't working out
+Sudden management shakeup
Hard to see in real-time!
7/ Extreme valuation compared to the opportunity
Nose-bleed valuation + big market cap = trim
Again, VERY hard to figure out!
But, I will sell a little if the valuation/market cap are both massive compared to where I think they will end up in time
Nose-bleed valuation + big market cap = trim
Again, VERY hard to figure out!
But, I will sell a little if the valuation/market cap are both massive compared to where I think they will end up in time
8/ Too large a position for me
Amazing, low-risk business ( $MA / $AMZN) gets to >15% of my portfolio, I will trim
Amazing, high-risk business ( $TSLA / $OLED) gets to >10% of my portfolio, I will trim
Amazing, low-risk business ( $MA / $AMZN) gets to >15% of my portfolio, I will trim
Amazing, high-risk business ( $TSLA / $OLED) gets to >10% of my portfolio, I will trim
9/ Lose interest
If I no longer care or want to follow the company, I will sell
Plenty of other awesome businesses to buy!
If I no longer care or want to follow the company, I will sell
Plenty of other awesome businesses to buy!
10/ Company acquired
If I own a company that gets bought out and has a high likelihood of closing, I will sell right away and redeploy capital elsewhere
If I own a company that gets bought out and has a high likelihood of closing, I will sell right away and redeploy capital elsewhere
11/ Want money for personal life
If I have a big expense and stock valuations are generous, I don't mind selling some stocks to pay for it
(isn't this the reason we invest in the first place?)
If I have a big expense and stock valuations are generous, I don't mind selling some stocks to pay for it
(isn't this the reason we invest in the first place?)
12/ Tax-loss harvesting
If I lost confidence in a business and want to lower my tax bill, I will sell a loser
If I lost confidence in a business and want to lower my tax bill, I will sell a loser
This list is in the 'when to sell' tab on my checklist
https://docs.google.com/spreadsheets/d/1y8quPLqAwNsBGvNUrJuMTqVwz-P59ms1A8ZDLE8Dc24/edit?usp=sharing
https://docs.google.com/spreadsheets/d/1y8quPLqAwNsBGvNUrJuMTqVwz-P59ms1A8ZDLE8Dc24/edit?usp=sharing
