Fellow investors, when the market is rising, as it is now, we all must wrestle with an age old question: should we sell our stocks that have so quickly run up 20%, 30%, 40% or more, or should we hold out for even more upside? A common but foolish saying holds that no one ever went broke taking profits, though as a stockbroker, I saw hundreds of investors do just that. Our clients often sold stock whenever they were up 30% (perhaps because this was the threshold at which it became legal for us to charge a 5% commission on the sale of the stock if we had already charged a 5% commission on the buy). As a result, they tended to surf from one stock to another, taking their 30% (or 20%, after we were done with it). Eventually they would hit a loser and, as often as not, ride it all the way down.
Lesson? Every stock that goes from $10 per share to $40 per share, or $400 per share for that matter, passes through $13 per share along the way. What impulse makes people grab for the $13? Fear? Self-doubt? Whatever it is, resist it. We’re going for doubles!
Today we will be looking at stocks that you can hold for as long as it takes for them to double. These are stocks you can go for weeks or months without checking on, secure in the knowledge that they’ll get where they’re going eventually. For those of you who held these stocks in 2016, congratulations on your double! But it’s only if you hold for another double that you will experience the true magic of doubling, and that, of course, is this: the second doubling is no harder to achieve than the first, but it is worth far more. A second double turns a 100% gain into a 300% gain. There’s no magic like math!
Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.