Sell or Hold?

[younginvestor2013]

So I took a shot at buying some stock a couple months ago. I bought 10 shares of Amazon at $254. It is at $305 now.
This represents a small part of my overall portfolio.

At what point do you decide to "sell" or "hold"? Obviously there are a lot of factors at play, such as company and industry outlook, tax consequences, etc.

If I were to sell, I would gross profit roughly $510, but would also have to pay an additional 30% on that (25% federal short term cap gain, and 5% state tax) so I would net about $357.

If I sold and netted $357, would you say I did well?

I'm new to the whole trading thing (just usually invest in mutual funds/ETFs), but I wanted to test the waters with individual securities.

 

[pb4uski]

While I personally don't buy individual stocks, I think that best practice is to have in mind an exit price when you buy. That said, has anything about the company changed from when you bought? Do you think the company is fully/fairly valued at $305? Would you buy it now at $305?

The answers to those questions may give you insight as to whether it is time to sell.

 

[target2019]

I recently read that investing in individual companies is all about their present earnings, and of course future potential. My gut (and family buying habits) tells me that AMZN has a great future. Many of the big tech companies are tarnished, and the market seems to be rewarding AMZN.

 

[haloFIRE]

+1 to pb4uski's post

I typically establish sell criteria before I buy.

 

[Rothman]

If this is your investing money, then the question I'd ask is there another stock you view with more upside? If so trade, if nothing strikes you but you feel amazon is over-priced at this point you could sit in an index fund until you spot that value buy opportunity.

 

[brewer12345]

+1 to pb4uski's post

I typically establish sell criteria before I buy.

+1.

When I am evaluating an investment, one of my standard processes is to come up with what price I would be interested in selling it for. When it actually approaches my predetermined price I revisit the analysis to see if I think it is worth more, the same, or less than my target price, but absent something major changing I usually at least take some money off the table when something I bought gets to my valuation target.

So what do you think Amazon is worth?

 

[Animorph]

While I personally don't buy individual stocks, I think that best practice is to have in mind an exit price when you buy. That said, has anything about the company changed from when you bought? Do you think the company is fully/fairly valued at $305? Would you buy it now at $305?

The answers to those questions may give you insight as to whether it is time to sell.

+1

Look before you leap. You bought this thing, and now it's like you have no idea why. If you bought Amazon because it looked like a quick buck and now it's reached your target, sell. If you thought Amazon was a great company for the future then continue holding it. If it's somewhere in between, you might consider hanging on for a full year and get long-term capital gains instead of paying short-term gains.

 

[clifp]

+1.

When I am evaluating an investment, one of my standard processes is to come up with what price I would be interested in selling it for. When it actually approaches my predetermined price I revisit the analysis to see if I think it is worth more, the same, or less than my target price, but absent something major changing I usually at least take some money off the table when something I bought gets to my valuation target.

So what do you think Amazon is worth?

Yes that is what I do also. Before buying a stock you first have to make a judgement how much it is worth. Presumably more than you bought it for otherwise why would you. When it hits your target price the default option should be to sell it.

But as Brewer says when it does get near the target price. It makes sense to reevaluate it. It the whole market is up 10% and your stock is also up 10% than maybe it makes to sense to hold it because on a relative basis the price hasn't changed. On the other hand if the market is up 10% and your stock is up 25% and nearing your target price than you need figure out what has changed. Are earnings up, is a new product or service a surprise hit, is there new development or legislation that changes the value of the company. For example if the Supreme Court ruled that state didn't have the right to make Amazon collect sale taxes that would make Amazon more valuable. In my case I typically buy dividend stocks, if my target price was 30% above the price I paid for it and the company increase it's dividend 30% in a year and said it intended to continue raising it dividend at 10% rate I might keep the stock.

 

[1st Tee]

So I took a shot at buying some stock a couple months ago. I bought 10 shares of Amazon at $254. It is at $305 now.
This represents a small part of my overall portfolio.

At what point do you decide to "sell" or "hold"? Obviously there are a lot of factors at play, such as company and industry outlook, tax consequences, etc.

If I were to sell, I would gross profit roughly $510, but would also have to pay an additional 30% on that (25% federal short term cap gain, and 5% state tax) so I would net about $357.

If I sold and netted $357, would you say I did well?

I'm new to the whole trading thing (just usually invest in mutual funds/ETFs), but I wanted to test the waters with individual securities.

My family is a customer of AMZN. Really like the low prices, free shipping and no sales tax.

This weekends Barron's says that AMZN reports earnings on Thursday.
Estimate is $0.06 per share. The stock performance over this last year
has been good with the stock recently hitting a 52 week high.

There is many different types of investing styles and one is value investing.
Many from this style say the stock is really over valued and priced for perfection.
Many growth investors point at the 21% growth rate and are looking for future earnings
to catch up with the stock price.

AMZN has a $139 billion market cap.

I wish you the best.

 

[pb4uski]

I had never looked at AMZN as an investment, only as a customer (and I love it), but at a 90 something PE it seems to me to be ridiculously priced. Not anything I would buy.

 

[NW-Bound]

I have not been following AMZN stock, though I have been its customers like most people here.

Out of curiosity, took a peek. Earning per share is estimated at $1.34 in 2013, rising to $3.16 in 2014. Like other retailers, most of the earnings come in on the 4th quarter due to Xmas shopping.

So, current P/E ratio is 300/1.34 = 224. If share price does not rise, the P/E will still be 100 in 2014. That's pretty rich. It does not mean the momentum will not propel the stock price higher. It's a trader's game, and I personally have no clue what it will do.

 

[aja8888]

Not an investor of Amazon here either, but the company has been doing a few things that has made me buy stuff elsewhere. This may possibly be a precursor to a revenue hit across the board (I am not alone, I would imagine).

1. I tried to order a small item for ~$10 and they would not let me purchase it until I added other items to bring my sale to $25 and qualify for free shipping. I ended up buying the item from another online retailer for $8.50 + $2.99 shipping.

2. They are charging me sales tax now on purchases (Texas) so I check other retailers before I use Amazon. Many times I find better deals than on Amazon once shipping and tax are added in.

3. They keep pestering me to sign up for Prime, which I want no part of.

 

[NW-Bound]

Off topic, but I also have to pay sales tax. Turns out that they have a fulfillment center right in town, so must collect the tax. However, that explained the super quick delivery.

 

[pb4uski]

Not an investor of Amazon here either, but the company has been doing a few things that has made me buy stuff elsewhere. This may possibly be a precursor to a revenue hit across the board (I am not alone, I would imagine).

1. I tried to order a small item for ~$10 and they would not let me purchase it until I added other items to bring my sale to $25 and qualify for free shipping. I ended up buying the item from another online retailer for $8.50 + $2.99 shipping.

2. They are charging me sales tax now on purchases (Texas) so I check other retailers before I use Amazon. Many times I find better deals than on Amazon once shipping and tax are added in.

3. They keep pestering me to sign up for Prime, which I want no part of.

How much would the shipping on the $8.50 item have been with Amazon?

The reality is that in short order we will all be paying sales taxes on online orders. I really have no problem with this as I think the playing field has been too unlevel in favor of online merchants for too long.

I signed up for Prime 6 months ago and have been very happy with the decision. We utilize the free 2-day shipping as well as video and free boook library. it has been worth the cost for me.

 

[aja8888]

How much would the shipping on the $8.50 item have been with Amazon?

The shipping was $5.99. If I remember correctly, the Amazon price was about the same or maybe a dollar higher. All in all, I got the item (small electrical pert) in two days from the non-Amazon supplier for a few dollars less, overall.

The part that burned me was the new deal on having to combine low priced items to meet a $25.00 minimum for free shipping. I had an order a few months ago where I purposely combined low priced items to meet the free shipping criteria and the items were shipped from three vendors, one in China. The part from China took 30 days to show up.

In my opinion, Amazon is not a great deal for the hobbyist who needs a wide variety of parts, etc.

Now back to the stock price? I believe any significant miss on earnings or revenue will cause the price to tank, based in it's stratospheric P/E.

 

[pb4uski]

I think you are being unfair. IIRC they have for a long time only offered free shipping on certain items where the order exceeded $25. I'm not sure why you would expect them to suspend the rule for you and it wasn't that you couldn't buy it, just that you were not eligible for free shipping since you didn't meet the minimum order amount of $25.

Even as a Prime member there are certain small items that won't ship right away but will ship with your next order. I forget what but recall running into this once and it seemed perfect reasonable for them to do so.

I agree with you on the stock price.

 

[aja8888]

I think you are being unfair. IIRC they have for a long time only offered free shipping on certain items where the order exceeded $25. I'm not sure why you would expect them to suspend the rule for you and it wasn't that you couldn't buy it, just that you were not eligible for free shipping since you didn't meet the minimum order amount of $25.

Even as a Prime member there are certain small items that won't ship right away but will ship with your next order. I forget what but recall running into this once and it seemed perfect reasonable for them to do so.

I agree with you on the stock price.

I am a bit off on this. I went back and attempted to buy the item again and was not able to complete the transaction for that item UNLESS I added more items to make the $25.00.

The estimate of $5.99 for shipping was wrong as I mistakenly stated that from memory since I looked at similar items at that time in lieu of that one on Amazon. The bottom line was that Amazon would not allow me to purchase the single item by itself. I had to add more items to get to $25. I would suppose that even if shipping for the additional items was paid by me, I would still not be able to buy the single item by itself. This is the item I could not buy as an individual order:

50W 6Ohm LED Load Resistors for LED Turn Signal Lights or LED License Plate Lights (Fix Hyper Flash, Warning Cancellor) : Amazon.com : Automotive

Apparently, it's part of the "new add-on program":

"This item is available because of the new Add-on programThe Add-on program allows Amazon to offer thousands of low-priced items that would be cost-prohibitive to ship on their own. These items ship with qualifying orders over $25 and are eligible for free shipping. Details"

 

[pb4uski]

I have run into the add-on things before but it wasn;t an issue at all since I was making a larger order. I think you may have been able to buy what you wanted under the "More Buying Choices" (which I'll admit that I hardly ever look at) or an expanded search of the item.

I found this:

50W LED Bulb Fast Flash Load Resistor for HID Kit & LED (Pack of 2) : Amazon.com : Automotive

for $7.97 with no shipping.

 

[aja8888]

I have run into the add-on things before but it wasn;t an issue at all since I was making a larger order. I think you may have been able to buy what you wanted under the "More Buying Choices" (which I'll admit that I hardly ever look at) or an expanded search of the item.

I found this:

50W LED Bulb Fast Flash Load Resistor for HID Kit & LED (Pack of 2) : Amazon.com : Automotive

for $7.97 with no shipping.

Thanks, kind of late now. I think that More Buying Choices link is something I need to pay more attention to. It's amazing how this company has progressed from just selling books (and being an auction site). I was a member when they allowed individuals to auction stuff off like eBay.

 

[ERD50]

... I went back and attempted to buy the item again and was not able to complete the transaction for that item UNLESS I added more items to make the $25.00.

I thought you were wrong on this, I've seen those add-on items, but I guess I already had enough in my cart. But I tried, and you are correct - I can't choose to pay shipping for this one item.

ooops, cross-posted with pb4uski, I was just going to suggest 'more buying choices'!

I tend to keep some things in my cart or wish list to fill out orders to $25. Works pretty well for me.

I can't comment directly on the stock price value, but I agree with some others that from a customer view, Amazon is going downhill, and I am a bit more aggressive at checking and using other options.

Two aggravations for me:

1) If I shop and sort by price, they don't include any required shipping charges. Some items have no other option than the stated shipping charge. Fine, but don't list the item first as $0.99 and then find the $7.99 shipping, and the $3.99/$1.99 shipping as 'more expensive', and then $4.99 with free shipping as 'more expensive' yet. Sometime I try to select by 'free shipping', but sometimes a combo with shipping is cheaper.

2) All these 'marketplace' sellers. I like to deal with Amazon, as they have a reputation. Now half the stuff I want is offered only thru a third-party, and I have to check their seller ratings. Some are slimy - I had a guy try to 'bribe' me to take down a negative rating. I reported him, but not sure if any action was taken. I bet a lot of people took the money, so his rating does not reflect how bad he is.


Whether that should affect any buy/sell decision, I can't say.

-ERD50

 

[aja8888]

ERD50: Thanks for mentioning the shift to third party sellers. I mentioned previously the I had to wait 30 days for a cheap battery charged to come from China.

I didn't realize when I placed that Amazon order with multiple items that was going to be the case. One thing I did notice was that within hours after placing that order, the battery charger was shown as "shipped", causing me to not be able to cancel the order. Nice trick, those Chinese have figured out.

I don't want this to turn into a bash Amazon exercise as other online vendors I have done a lot of business with are heading in the direction of using 3rd party vendors. One in particular is NewEgg, which used to only sell computer parts. Now they sell everything and some of it through third party vendors.

I would suspect that sooner or later, Amazon will get tagged negatively for these business practices and the lofty stock price will take a big hit. I could be wrong, though, and I am frequently wrong when picking stocks. The only sure way for its stock to take a hit is if I were to place an order for my account.

 

[siamond]

So I took a shot at buying some stock a couple months ago. I bought 10 shares of Amazon at $254. It is at $305 now. This represents a small part of my overall portfolio.

At what point do you decide to "sell" or "hold"? Obviously there are a lot of factors at play, such as company and industry outlook, tax consequences, etc.

If I were to sell, I would gross profit roughly $510, but would also have to pay an additional 30% on that (25% federal short term cap gain, and 5% state tax) so I would net about $357.

If I sold and netted $357, would you say I did well?

I'm new to the whole trading thing (just usually invest in mutual funds/ETFs), but I wanted to test the waters with individual securities.

SELL. Use the proceeds to buy a good book on Passive Investing. Think hard about it. This will be your best investment ever! I mean it!

 

[younginvestor2013]

I thought I'd report back to let you all know that I decided to sell today. I sold at ~$313 and bought in at $254 for a gain of $59 a share, less 30% to Uncle Sam with a net profit of about $41 a share, or $410 overall. Bought in Mid May. The S&P500 is only up about 1.90% for that time period, and this stock (after taxes) will have me up about 15.5%.

Nothing to write home about but this was my first time trying individual securities. I just plan to take the $400 and re-invest it in my ETF allocation.

Also just redeemed about $600 of credit card rewards points and am investing those in my standard ETF allocation.

This equated to a nice $1,000 in additional savings this month, on top of my regular savings

 

[Mulligan]

I thought I'd report back to let you all know that I decided to sell today. I sold at ~$313 and bought in at $254 for a gain of $59 a share, less 30% to Uncle Sam with a net profit of about $41 a share, or $410 overall. Bought in Mid May. The S&P500 is only up about 1.90% for that time period, and this stock (after taxes) will have me up about 15.5%.

Nothing to write home about but this was my first time trying individual securities. I just plan to take the $400 and re-invest it in my ETF allocation.

Also just redeemed about $600 of credit card rewards points and am investing those in my standard ETF allocation.

This equated to a nice $1,000 in additional savings this month, on top of my regular savings

I enjoyed reading about your thoughts and processes going through whether to sell or not. I bought all together close to 500 shares of Intel earlier this year. It was my first stock purchase in over 15 years. I guess I will just hold it because the only reason I bought it was for the almost 4.5% juicy dividend. Although I know they say never let the tax tail wag the dog, I could never stand to sell unless I got the long term cap gains tax rate of 15%. Hopefully I will get over this stock thing, and eventually sell and put it in my mutual funds where it belongs.

 

[ownyourfuture]

If my math is correct, you made a 14.00% (after tax) profit in 2 months.
Very nice!

I would never invest (directly) in Amazon as I don't respect them as a company.

That being said, ultimately the decision is up to you.

Regards