Selling strategy under scrutiny: The 75% leap right after selling

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This article is a website version of our weekly FREE Best Ideas Newsletter sent on 22.08.2023. Sign up here to get it in your inbox every Tuesday.

I sold the stock on Monday and by Friday it was up 75%. +75%!

That is what happened to me on last week and I'm sure you've got a similar story (if you have, please hit reply to send it to me).

How it all happened

Let me go back a bit and tell you how it all happened and what you can learn from it.

I bought SK-Electronics in May this year after it was recommended in the newsletter in March. Initially it went up about 10% but then slowly started falling a few percent every week.

It got to the point that every Monday when I review my portfolio the company was close to hitting its trailing stop loss level of 20%.

Over the same time the Japanese market was up over 10%. So, it was falling against the market.

On Monday last week I had enough. The company was sitting at -19% and was down on Monday morning in Japan. I pulled the emergency brake and sold.

Well, you can imagine what happened. On Tuesday the company reported good results, more than doubled its dividend and the stock increased 25%. Over the rest of the week, it increased another 50% bringing its weekly move to just over +75%! (Subscribers are sitting on a 68% profit – see below)

As you can imagine I was pi**** off to say the least.

What is the chance?

Thinking about it a bit more I wondered, what the probability was of selling a stock on Monday, results being released on Tuesday (which in the current economic environment could have gone either way) and the stock then increasing 75%.

I can't say for certain, around 1%.

I'm sure it's happened to you

I'm sure something like this has happened to you.

Not just losing out on a substantial gain but avoiding a big loss as a stock price plummeted shortly after you sold it.

The thing is, why do we remember profits missed so much more than what losses we avoided?

The same as we remember your large losses a lot better than large profits.

Emotions and investing

This my friend is human nature.

It is called loss aversion, something for which Daniel Kahneman and Amos Tversky got the Nobel Economics prize.

Because we all have this strong loss aversion is why we follow a strict 20% training stop loss system and stop buying when the market is below its 200-day simple moving average. Rules I follow in my own portfolio.

We do this to keep losses low and make sure subscribers and I can stick to the investment strategy. A strategy we know (have tested in all markets over long periods) will give you great long-term returns.

Make sure you have a plan

That is why I keep on reminding you to put a system in place to keep your losses low or manageable for you.

If you don’t it may lead you to throw in the towel and sell everything at the worst possible time – extreme market low – when it’s the best time to buy.

Quant Value newsletter update

Newsletter subscribers are sitting on a nice 68% profit from SK-Electronics (mentioned above) as it only looks at stop loss levels once a month.

Despite the fall in most markets last week newsletter subscribers are still sitting on the following solid gains:

North America +14%
Europe +8%
Asia +20%
Crash portfolio (2022) +29%

If these ideas sound interesting, you can get more information here: Your Treasure Map to Europe, Asia, and North America's Hidden Gems!

Shareholder Yield Letter update

Since May when we started the 16 ideas have already paid an average dividend of 0.5% and am sitting on an average return of 1.8% after the pull back in the markets last week.

If this sounds like the kind of companies, you would like to invest in you can find more information here: Invest big, win bigger with our market beating large-cap strategy!

Your, helping you keep losses and emotional stress low analyst

PS To find great companies that exactly meet your investment strategy right now click here.

PPS It is so easy to forget, why not sign up now before you get distracted?