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- ⛏ Reasons to NOT sell on a double
⛏ Reasons to NOT sell on a double
and other brilliant ideas
Greetings Sunday Driver Contrarian,
This is The Next Big Rush, a daily newsletter to keep you informed about the world of mining/energy investing. Where we come together to loaf around. 🍞
Here's another letter about dough from a reader:
Dear Editor,I’m a die hard uranium investor since 2013 and have never pulled the trigger when it comes to taking profits. I’ve missed out on so many opportunities to take profits and didn’t with fears of missing the train. For example I could have taken $600,000 profit last year but didn’t; this is where I need help. Any guidance would be helpful with my understanding that you’re not a professional advisor. Uranium Diamond Hands
Dear Uranium Diamond Hands,
There’s an old belief in the high-risk investing world (i.e. mining) that you should sell on a double, retrieve your initial investment and save it for another opportunity. While it's an okay idea and I respect those who abide by this rule of thumb, I do not do it.
Why?
Because a lot of projects and companies don’t work out, ones that do need to earn you multiples to make up for your losses.
And that’s why selling on a double doesn’t make sense to me. A double means that the story is working out, and it’s somewhat likely to go farther. On a triple, it's much more attractive.
You may find it fits your style, so don't take my word as gospel.
Bottom line is, the fear of missing out is close to a malfunctioning of our brains, so we must deal with it head on.
Here are five other ideas:
💡 I like to buy undervalued stocks, but that needs to have a number attached to it. In other words, if I’m buying a developer, once the market cap reaches its NPV, I consider it to be fairly valued. Meaning, there’s no reason for it to appreciate. Then I sell.
💡 I compare my holdings to other companies - what does company A have that makes them better value or more prospective than company B? If for example a developer is expecting a re-rating from becoming a producer, as they should, how are similar producers being valued?
💡 I may commit to always selling losers before year end to book those losses - sell the gains proportionately and ask myself if I want to reinvest in the same companies - I find that if I'm out of a stock, I may not want to come back, and that’s my smarter self telling me it’s not a great deal.
💡 I may have a financial goal that I'm happy with every year. I might sell a portion of the gains (pre-defined) when I hit it, and everything else is gravy.
💡 I sometimes simply watch my stocks, and when they don’t make new highs in X months, I sell a portion. I can reinvest in the thesis in names I find more undervalued.
Hope this helps!
The Editor,
P.S. If you're reading this, let me know which of these 5 ideas best resonates with you. I promise to read them all, and will keep it between you and me.
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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