<<I do have a quandary. MTSN is now more than 15% of my net worth.>>
Ian, since you invite comment, let me add my 2 cents.
From prior posts I know that you are a strong believer in diversification and in generally accepted asset allocation models which argue against letting even good positions grow too large. Although this is perfectly understandable, and is the generally accepted "wisdom" -- indeed, diversification is something of a sacred cow -- I believe that concentration, not diversification is the best way of obtaining not only greater returns but safety of principal as well. For "enterprising investors" who have the time and the knowledge to thoroughly understand their investments, I believe that concentration is the way to go. I think Warren Buffet, and Graham and Dodd would agree.
Obviously, the trick is to select the right companies, and this is admittedly easier said than done. But that is a separate issue.
I believe that the simple fact that a stock's price has appreciated -- even greatly appreciated -- provides no valid reason for selling the stock. I think the best guru on selling is Phil Fisher (Common Stocks for Uncommon Profits. I recommend it as a great read, if you haven't already read it.) To paraphrase Fisher, there are only three reasons that any investor (investor, not trader) should sell a stock:
1. You discover that your initial analysis was in error, that the stock/company is not what you thought it was when you made the decision to invest, and that the investment does not infact meet your investment criteria. In this case one should recognize the mistake and get out of the position. You've been in MTSN a long time and I'm sure you know it very well, so this circumstance would not seem to apply.
2. The fundamentals of the business deteriorate, and the investment no longer meets your criteria with regard to safety of principal, expected earnings, etc. Up to you to decide of course, but it would not seem that this circumstance applies to MTSN at this point.
3. You find a better place to put your money that promises greater security, greater return, etc. This is always possible, and will eventually happen to MTSN, given the cyclical nature of the industry. But its also one of the most frequent mistakes investors make, trading something they know and understand, for something that they think offers greater return, but which they understand less well and are therefore more prone to miscalculate.
While I recognize that my views on this subject are in the minority, I would not recommend getting out of a good position simply because one is concerned that the position represents too great a portion of one's assets. Unless maybe if it was grossly disproportionate -- i.e. well over 50% -- and even then I'd think long and hard about it, because if its the right stock its the right stock, and if its not its not, no matter how much of it you own.
FWIW
Andy
PS: If you hold and MTSN tanks next month, please don't blame me! <g> |
