I was. If you are invested in midcaps or small caps, then it is likely that you would have seen some of your picks jump 5-10% in a day. I have seen some of my picks jump by that amount and some of the companies I was analyzing have gone up by the same amount and thus rise beyond my buy levels.
So how did you react to all this? happy?
I can bet that you must feeling good about it, unless you love self torture,. I was feeling good too, till I realized that the mid-cap and small cap index has risen by 100%+ in the last one year with several stocks going up by 200-300% percent in the same time.
When I saw this statistic, it poured cold water on my euphoria and reminded me of the following quote
‘A rising tide lifts all boats’
So there is nothing special in my boat or in other words, in my stock picks. I was lucky to be in the right place at the right time.
What does this mean?
If you are thinking – what makes this dude happy? A 100% rise in the midcaps and small caps and all he can do is whine about it!
Don’t get me wrong. I am happy that my picks and possibly yours have rise so rapidly in such a short time. If you had the courage to buy stocks a year back, then you have been justly rewarded.
The under pricing however got corrected some time back and now we may be entering a bit of a happy zone where everyone thinks that the future is going to be all bright and sunny and there will never be any problems.
The reality is that the future is never crystal clear. This risk we now face is that any negative news can cause the sentiment to sour and the midcaps or small caps to drop.
What to do?
As I said in my last post, I have started selling those stocks which I will not buy if they were to drop 20% from current levels. If I am not too optimistic of the fundamentals or think the stock is at fair value, I have started selling my holdings. I may be completely wrong about it and we may get another 50% rise.
So be it.
I think in my case greed is more difficult to manage than fear. I did not second guess myself to load up on stocks last year when the market tanked. The decision to start selling now is more difficult.
What am I selling?
I have started liquidating my smaller position like Denso, VST etc. I will however hold my long term holdings such asian paints, CRISIL etc. If the market tanks, I will load on them further.
Should you do what I do?
Think of it this way –
What incentive does Rohit have in mis-leading me? (Hint – none!). So you can listen to me.
What if I am wrong? Do I lose anything? No, I don’t. This is a personal blog, so I can write whatever I like. Hopefully I am not adding to the crap out there on stock markets :)
So please do your homework and think twice before taking free advice :) (does not mean paid advice is any better)