I received a question from a subscriber earlier this week that resonated with another question I received from a subscriber shortly after I sold one-half of our position in Indian mining company Sterlite Industries (
) for a
gain of 95.12% a couple of months ago. Both these questions were related to the trading axiom "Let your winners run but cut your losses quickly". In the eyes of both these subscribers I had violated this axiom.
The subscriber who wrote to me about Sterlite Industries and Tata Motors (
), wanted to know if I felt any seller's remorse after selling 100% of my position in Tata Motors and 50% of my position in Sterlite right before a rally in Indian stocks that saw Sterlite's stock move up to $11.57 just days after I sold it for $9.19. He was quite clearly referring to the "Let your winners run.." part of the trading rule of thumb I mentioned above.
While I did feel some amount of seller's remorse at selling half my position in Sterlite, years of experience have taught me that I am usually much better off taking profits (or losses) periodically based on a combination of company fundamentals, sector fundamentals and sentiment (fear like we had few months ago when I purchased Sterlite and euphoria at the time I sold it). I finally sold the second half of my position in Sterlite last week for a gain of 167% as mentioned in the
July 2009 investment newsletter.
I pointed the subscriber to a comment that someone left at the bottom of this article that Seeking Alpha republished from the SINLetter blog entry Taking Profits in Umpqua Holdings. Oregon based regional bank Umpqua Holdings (
) was trading at $16.47 when I sold it for a gain of 35.78% and had appreciated by, get this,
56 cents to $17.03 when the commenter made the statement
"Missed out on that one, huh? Oh ye of little faith! Expect money to continue into this stable, divi-paying player". The stock went on to hit a high of $19 before crashing to its current price of $7.62. Given that the company cut its dividend to 5 cents per quarter and the stock is now available for less than half our selling price, I am not exactly certain who missed out.
