When facing paper losses, an investor has to ask why is the stock price down from when he purchased it. Are revenues and earnings declining for the past few years, or is the decline due to temporary macroeconomic conditions?
What is the intrinsic value of the stock? Has the investor over paid for the stock? Is the business a still a good quality business, with a strong economic moat that its competitors struggle to break into? For example, if you look at Apple's annual filing Form 10-K, it mentions that Apple's competitors often sell electronic products are very thin margins, and sometimes those competitors are loss making selling these electronics, in an attempt to undercut Apple's premium pricing. Eventually when the market conditions turn, good quality businesses will eventually recover.
Examples are Apple, Microsoft & Nvidia, where year-to-date they are up 40.27%, 38.95% and 172.06% respectively. In fact, Nvidia is at it's all time high, while Apple & Microsoft are close to reaching that level.
If the investor is holding bad quality business, especially if it's a speculative stock that other retail traders have bought based on hype, or it's loss making continues for several years, it's time to sell the stock and minimise the losses. Examples of business that are in a decline are AMC, Peloton, and Sea Limited. These stocks will never recover to their highs reached during the liquidity boost during the pandemic.
The recovered capital should then be reinvested into top quality businesses.
Modify on 2023-05-27 09:38
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Blatantly obvious how AAPL has been kept under the artificial opex resistance of 175.7. Astronomical odds this has just been coincidence for a year and a half. Meanwhile TSLA moves freely between the 160s and 210s like nothing.
Buy MSFT, Adobe, and Google $20,000 in each. Hide them from your self. In 10 years you can retire and move to Hawaii.
Anyone selling covered calls with AAPL with strikes at 177.50-182.50 out three 15-30 days DTE? I'm long term bullish and have been holding off doing anything like this while the debt ceiling issue isn't resolved. I like having a little hedge like this in place rather than stop losses which are easily manipulated by the algos.
Great ariticle, would you like to share it?