Tuesday, May 5, 2009

The Kirk Report

The Kirk Report

Selling Priorities

Posted: 05 May 2009 10:55 AM PDT

Like many of you, my biggest challenge right now is figuring out what to sell.

Case in point, if you own Las Vegas Sands (LVS) like I do, do you sell the entire position, trim it down, just hold and hope, or something else? After all, a winning trade isn't a winning trade until it is booked.


After I purchased the position back in March (remember the Lucky Charm Portfolio?), my most aggressive upside target was $11 per share as that would fill the early November gap. Now, I'm thinking this dog could run all the way back to $16 per share. In fact I see that ValuEngine's fair value estimate on this stock is at $16.89 per share. As you already know, I'm skeptical of fair value estimates (or other similar valuation metrics), but it is always nice to see a stock doing well that hasn't even hit its fair value level yet.

The danger in this kind of "I'm going to find a reason to stay long this big winner" logic is there's always a reason to keep a winning position in place if you look hard enough to find it. And, frankly, that's the trap I'm trying to avoid in this trade today. So, this morning, I sold 1/4 of my position (which more than covered my original investment) and I'm letting the rest ride with a tight trailing stop (now just under $10 per share). If it rolls over and dies, I've at least taken some off the table. If it continues to win, I still have a position in place that will profit from it. A win-win, in every sense of the word.

In fact, every position I own I've been taking 1/4 off my profits off this week (usually enough to cover my original investment) and giving the stocks room to run higher and provide some clue that the gains I have in those positions are in jeopardy. Yes, winners can keep winning, just like losers can keep losing, but if your targets have been hit, be careful about finding reasons not to take some easy profits off the table. And, as we all will agree, profits have been easy to come by of late.