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written by reader New Member question

By piccola, February 6, 2020

Hello all,
Just joined your site and am finding helpful information, especially in the debunking of ”hot tips”. I see the annual portfolio report has proven stocks with good returns. My question is if there are recommendations for new stocks, since most in the portfolio have already had quite a run up?
I’m looking to invest about $40k, with another $40k in about 6 months.
In the past I spent a lot of time researching and was very early in AMD, TTD, NVDA, SQ and others. I’ve tended to let fear get in my way and end up selling too early. I don’t know all the ins and outs of this site, but will there be stock ideas that are more entry or mid level? In other words, ones that aren’t currently at the ATH?
Thanks for any feedback or advice,

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Travis Johnson, Stock Gumshoe

Hi Piccola,

Thanks for joining us. I don’t know what the future will hold. I make new investments with some regularity and report on those to the Irregulars, both in add-on purchases to stocks I already own and in new additions to the portfolio (I’ve added three new stocks to the portfolio in the last month, for example). I make no attempt to “recommend” a new stock each month, I just relate the decisions I’m making with my portfolio — I found years ago that choosing a “stock of the month” was not nearly as honest a representation of my analysis and opinion as just sharing with readers what I’m actually doing with my money.

Over the past few years, some of the stronger performers have really overwhelmed the portfolio, and in some cases I’ve “let it ride” with those holdings (like TTD, for example), while taking partial profits in others. In the long run, I find locating small cap stocks to be the most interesting exercise, and I often make small purchases in small stocks and write about those, but because this is a real portfolio it usually takes time for me to build meaningful positions that rise to the top of the holdings list — mostly because there are some very large long-term positions that I’m very unlikely to sell.

And while it is hard to do, and it goes against logic, throughout stock market history buying at “all time highs” has usually been a spectacular idea. That has certainly been true for the past decade… and yes, it makes me nervous and it should make you nervous, because at some point there will be meaningful corrections in a lot of growth stocks, but you could have said the same thing about Amazon, to give a high-profile example, at its all-time highs of $400 in 2014, or $800 in 2016. If you feared $800 in 2016 and thought a correction was inevitable, you were right — but the correction didn’t come until after the stock topped $2,000, and the drop was just to $1,400 or so and was recovered quickly.

I am concerned about valuation with many of my holdings, and with many of the stocks I research — eventually rationality will come to many of these names and they’ll trade based on their profits instead of based on future dreams of revenue growth… but it could well be that profits will have climbed enough by then that the market was right and today’s price turns out to be reasonable, and it’s very possible for popular stocks with good stories to be “expensive” for a very, very long time. Stocks that people want to own go up in price, and sometimes you just have to shrug your shoulders and let the market tell you, through stop losses, when a stock loses its popularity and has to be re-considered based on your assessment of the foundation provided by the actual earnings and the actual business..

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Old Guy
2 years ago

Hello Piccola. I think you made some good stock picks. In terms of your fear factor and selling too early, I’d suggest you look into trailing stops. They’re a great way to limit your potential losses. I would suggest, however, that you not make them too tight. In my portfolio I usually place them between 15% and 20%. They can help you sleep a little better at night.

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