I'm sure there are plenty of investors who just can't see how a stock like QUALCOMM could go any higher after its recent spectacular rise. Institutional investors, in particular, seem to thrive on rules of thumb that tell them to sell at least some of their positions when the stock goes up a certain amount. The critical factor here is that the people who rush to sell are doing so without any real understanding of (1) growth potential, both short and long term, and (2) management quality, a more subtle factor that tends to be downplayed, when in reality it is the number one factor that should govern ANY investment.
That being said, I agree that the urge to take the money and run is prevalent enough to create volatility, as well as some rationale for taking short term profits. When a client asks me about selling a stock like QUALCOMM, my advice is to consider prudent sales of covered calls. When the stock, prior to the split, for example, was near 215, selling covered call options seemed like a reasonable strategy to lock in profits, particularly since there was a likelihood interest rates would rise, lowering the prices of many stocks. But outright sales of the stock, other than to meet emergency financial situations, in my view are, well, just plain silly. |
