The LML Group Hong Kong: When to Sell Your Winning Stocks

The LML Group Hong Kong has this opinion about: The LML Group Hong Kong: When to Sell Your Winning Stocks

It's been said that the effect of Wall Street never changesthe stocks change, the investors change, but Wall Street itself never changes, because human nature never changes. And part of human nature is to resist doing what's uncomfortable; people usually look for explanations and reasons to justify doing what feels good.

In investing terms, what feels good to most is holding on to a big winner. (Or maybe we should say instead that what feels bad is selling a big winnertwo sides of the same coin.) Usually the company behind the stock is popular, makes great products and has a great story. Because of this, investors hesitate to sell, saying that a stock's weakness with a variety of explanations, all of which will pass in timeor so they think. With this in mind, it hasn't been a surprise to hear that many investors are still holding on to Research in Motion (RIMM), Apple (AAPL) and Baidu (BIDU).

Remember that no matter how great a stock has been or how great the company, every stock eventually tops out. And with the right indicators decisively being bearish, the odds favor these stocks having already hit their highs. Another thing to remember is this: The worst-performing stocks in bear phases are often the ones that rose the most during the prior up cycle. Now, we're not going to get into a prediction game of how long the market is going to move, and how the drops in some of the big leaders will be. But we do know that the trend is always changing, and seeing how much water these big stocks have taken on, it appears some of their runs are over.

Bottom line, if you own one of these big leaders, you should be looking to their highs on rallies. (If you have a huge profit, you could consider holding a small position, as we've done with First Solar.) If by some chance these stocks buck the odds and head higher, you can always buy them back in the next bull phase. Another reason to sell those "old" winners: Even if they do head up, you probably won't want to buy them back. Why? Because there will be new leaders in the next advance, stocks that are just getting off their launching pads. That's why we're spending time now searching for the next Apple, the next Research in Motion, and the next Google, confident that the next upmove will be well worth the wait.

The LML Group Hong Kong: When to Sell Your Winning Stocks

By: davemartin

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