Tuesday, November 20, 2012

Sometimes when you hold the stocks for too long

A lesson on long term stocks investment, despite the word - long term - is never to fall in love with the stocks you hold. Just about last month, I met a long time friend who had worked in HP for many years since he left college. He had just left the company for a year now letting go quite a senior position after having been much traveled along with the company.

Throughout his career there, he had accumulated hundreds of thousands dollars worth of stocks options of HP which he exercised, and part of them are bonuses in kind (in the form of stocks) as I understand. The thing about him is that he had never sold a single HP stock despite having lost confidence on the company a year ago (or so). As HP continues to lose momentum and market share, he was still holding on to the stocks.

What I am a bit surprise is that he knows HP is facing a barrage of problems as well as new competitions, which it is not really able to solve. In fact, as an employee who has been there for a long time, he as an insider realizes it much more than me as we were talking about the future of PCs and what other stuffs HP is in to. (Funny thing is that if you read Steve Jobs' biography, he pretty much looked up at the company when he was young, as HP probably was one of the first to be successfully started from a garage environment)

Back to this school friend, as an employee who has never been thinking much about the stocks but more of the future of the company, he is just holding on to the stocks. If you look at the below chart, most of his stocks were bought at between $30 to $50, when times at HP was better (as your position gets higher, obviously you will get more stocks options). Hearing this, I asked him to sell and change to other US companies which probably would have better and clearer future (and he does not want to bring back his money in US). Names like the bigger banks such as Bank of America, JP Morgan, Wells Fargo (as I see the that the housing recovery would have carried these large banks) or some stronger names more directly related to the housing sector like Home Depot or even Berkshire Hathaway.


Ironically, he called me again last week and said that this time around, he is going to do it. I hope he has changed his portfolio from a single HP stock to some of the larger names as it seems, HP had just hit a bummer today.

Whatever happens, sometimes it is hard to let go of the stocks that we have held on to for many years. However, if the feeling on the company (or management) is trending negative and without any sight of turning around, it is best not to hold on to the company anymore and, just Move On.

1 comment:

Aarav Sharma said...

Can I just say, this blog is what got me through the day today. Every time I read it, I just get more and more excited about what’s next. Very refreshing blog and very refreshing ideas
Stock investment