Selling Stocks, and Bag Holders

With the recent rotation from tech to small caps some investors got stuck “holding the bag” thus becoming “Bag Holders” And that’s okay, until it’s not. Bag holders are investors that buy in when prices are high but then stick it out after their stock goes south, Ouch. No one can say with certainty when a stock will move, that is why Trade Management is so important.

Do you like a good story? Years ago there was a guy I knew, I liked his sister but wasn’t buddies with him. He was kind of a “smug” person if you will, one of those people always thought they had it all figured out. I myself am a true believer in “We don’t know, what we don’t know”.

Well one day reps from a large convenience store chain approach him wanting to buy his corner lot. It’s a great space, extra large lot, sits on the corner of 3 intersecting roads. They tell him they knew the value which was 350K at that time but that they would pay 500K for it. He says no, he wants more, they then offer 700K final offer. He tells them he wants 1Million. They say no thank you, and walk away. Remember now, this guy always has an answer or an excuseforeverything. Well after a while he goes back and tries to tell them that he will take 800K for it his final offer. What they then share is that they already bought a location directly from the city, and it was only about 3 football fields away. The City not only sold it at a cheaper cost as they wanted that area developed, but they gave them tax breaks also. Sucks to be Mr. know it all, make excuses “smug guy” Greed Kills.

When CHWY beat earnings at the end of May this year investingwithfaith.com alerted you to it’s rise when it was at $20.00. It then went parabolic hitting over $38.00 quickly. New buyers were jumping in daily as told by the Volume. It then capitulated dramatically. We got out when it was at the $28.00 area for a 40% gain. That’s not far from where it sits right now, but it is quite a distance to make back up for the bag holders that bought out of exuberance up at the top and refused to sell when it crashed back down.

New All Time Highs are happening daily right now. There is money to be made, and there will be money that is lost. Rotations can and do occur, we are growth investors here, not “hold and hope”. I’ve never met a bag holder yet that didn’t make excuses, and one thing that we never want to be is “Bag Holders”

Invest wisely, live charitably and be well

Brother Bill