FEEDI had lunch with a friend last week and he said - why don’t you simply sell after you have a 15% gain in the bag? My response was that you will never have a 25% or 30% winner if you always sell after a 15% gain. He said – it seems like you have more trades that go from 15% to 10% than 15% to 25%.
Just for the heck of it – I went back and reviewed all of the 2007 Real Money portfolio trades. There were 10 trades that traded over 15% that were eventually sold at a smaller percentage. Those trades were sold at an average of 7.9%. There were also 8 trades that sold over 15%. Those trades were sold at an average of 23.5%.
So, my “friend” was right. Using the 2007 Real Money portfolio as a proxy, I did have more stocks go from 15% to 10% than from 15% to 25%. However, the results were NOT better when using a sell target. That being said, I must admit that the difference in performance weren’t earth shattering.
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