After selling a ‘winner’ to realise a profit, many investors feel frustrated when that company’s share price continues to soar. The prospect of foregone gains can be exasperating, leaving investors wishing they’d waited until the price had peaked before selling.
However, this is incredibly difficult to achieve in reality. I can count on one hand the number of times I’ve sold a stock when its share price had hit its high.
So, when you own a stock that has performed strongly and it looks like it will continue to perform well, when should you sell? As an active, as opposed to a buy and hold, investor, determining when to sell shares is a critical part of our investment process at Wilson Asset Management.
Our approach means we have a tendency to sell before a share price peaks. One example is Ainsworth Game Technology (ASX: AGI). We started buying AGI shares at around 30 cents in 2011 and selling them at $2.04 before they reached a remarkable $4.79 at at their peak.
In an article published in Cuffelinks, I outline some important factors that form part of our investment methodology and inform our decisions to sell our investments, including our winners.
To read the full article, click here.