Talk some sense into me on NVDA

[brokrken]

I was extremely lucky and bought 400 shares of NVDA in 2010 for about $10 per share. A modest $4k investment. As of this moment, that investment is worth $227k!!! The problem (if we can call it that) is that it now makes up over 11% of my non-real estate net worth.

Part of me says to sell it all and be happy I've done so well. The other part of me say that I didn't get to this point by selling it every time it had a nice run over the last few years.

Help me see the light. I know I should take some money off the table. But the FOMO would kill me if it kept running.

[Qs Laptop]

Quote:

Originally Posted by brokrken I was extremely lucky and bought 400 shares of NVDA in 2010 for about $10 per share. A modest $4k investment. As of this moment, that investment is worth $227k!!! The problem (if we can call it that) is that it now makes up over 11% of my non-real estate net worth. Part of me says to sell it all and be happy I've done so well. The other part of me say that I didn't get to this point by selling it every time it had a nice run over the last few years. Help me see the light. I know I should take some money off the table. But the FOMO would kill me if it kept running.

First of all, congratulations!

I own NVDA as part of my Fidelity Select Semiconductor fund. It's about 20% of the fund weighting. It's been a stand out performer.

Any decision to sell should be considered with capital gains and overall income taxation in mind.

Sounds like it might be good for you to sell a small portion, maybe twice as much as the original investment, or $8,000 worth. This way you will be guaranteed a 100% return and still be invested.

You could also set price goals for future sales. For example, if the share price reaches $600 a share you sell another predetermined dollar amount. If it gets to $650 you sell a bit more. The amount would be whatever keeps your overall income taxes in check.

[copyright1997reloaded]

Quote:

Originally Posted by brokrken I was extremely lucky and bought 400 shares of NVDA in 2010 for about $10 per share. A modest $4k investment. As of this moment, that investment is worth $227k!!! The problem (if we can call it that) is that it now makes up over 11% of my non-real estate net worth. Part of me says to sell it all and be happy I've done so well. The other part of me say that I didn't get to this point by selling it every time it had a nice run over the last few years. Help me see the light. I know I should take some money off the table. But the FOMO would kill me if it kept running.

If you didn't own it, would you think:
1) NVDA has a great future, is priced reasonably for that future - I'd like to buy some
2) NVDA has a great future, but is already priced all that future in

If the answer is 1) keep (almost) all of it. Sell a bit if desired to get the single stock risk down.
If the answer is 2) start on a plan to lower your exposure, knowing that it can get more overpriced than it already is.

[target2019]

Quote:

Originally Posted by brokrken I was extremely lucky and bought 400 shares of NVDA in 2010 for about $10 per share. A modest $4k investment. As of this moment, that investment is worth $227k!!! The problem (if we can call it that) is that it now makes up over 11% of my non-real estate net worth. Part of me says to sell it all and be happy I've done so well. The other part of me say that I didn't get to this point by selling it every time it had a nice run over the last few years. Help me see the light. I know I should take some money off the table. But the FOMO would kill me if it kept running.

I would trim, and keep trimming until the allocation was comfortable for me. The other half of the question is what do you do with the harvested gain. Defintely use the dividend instead of reinvesting.

[brokrken]

Thanks, all. To be clear, this is in an IRA, so no tax burden.

Copyright, I agree with your logic. Just need to decide how much to trim.

Target, yes, the dividends don't get reinvested. They are very small though, only about $256 per year.

While I ponder this dilemma, I just sold Nov 20 665 calls for $10.50. So, we'll see how that goes. I only sold the calls on half my position.

[njhowie]

Quote:

Originally Posted by brokrken To be clear, this is in an IRA, so no tax burden.

I would sell it all and be happy with my windfall. For most folks, that amount of gain is more than they will even save for retirement in their entire life.

[OldShooter]

Quote:

Originally Posted by copyright1997reloaded If you didn't own it, would you think 1) NVDA has a great future, is priced reasonably for that future - I'd like to buy some 2) NVDA has a great future, but is already priced all that future in ...

This. Absent tax issues, every day you own a stock is exactly the same as making a decision to buy a stock on that day at that day's price. There is no "hold;" There is only "buy" and "sell."

[Blue531]

Unless you need the money, keep doing what you've been doing and hold onto it. NVDA is a good company with very good fundamentals. Unless you are tied by your own standard of diversification, why sell a winner, especially as low as you bought in. At the rate it's been going, this stock could make you a millionaire. It's your decision obviously and not a one of us knows what the future holds for it. I would watch it daily and assuming I did not need the money, continue to let it grow. If it falls too far or the company appears to falter, I would consider selling. I would stay on top of research in the company and company news and earnings.

[Koolau]

It's not mine, so no dog in the hunt. I find myself in roughly the same position with my Megacorp stock. I have some in 401(k) and some as exercised stock options. At one time while I was still w*rking, the stock was over 50% of my port! I have always believed that this stock is the reason I was able to FIRE when I did (that and a modest pension.)

The difference is that I've trimmed my position several times - and the stock just keeps coming back! It's gotten back to 10% of equities several times. Probably time to trim again but YMMV.

[pb4uski]

Protect your gains with a protective put or a stop loss order (and yes, I realize stop loss orders are not foolproof).

[copyright1997reloaded]

Quote:

Originally Posted by OldShooter This. Absent tax issues, every day you own a stock is exactly the same as making a decision to buy a stock on that day at that day's price. There is no "hold;" There is only "buy" and "sell."

Now if I could only consistently follow my own advice.

A wise investor taught me this at an early age. Take each of your positions and apply this logic. While I've done pretty well over the years, I would have done much better had I been strict about following the policy. Instead I have fallen prey to emotion, the tail wagging the dog, and the fallacy of believing management.
1) Emotion - we are emotion driven creatures, and this clouds our investment decisions. It is on both fronts - the desire to keep something that has moved up, even while we know the future prospects don't warrant the price. This also applies to losers, not asking ourselves why we bought it (investment thesis) and if that thesis still applies. This also means questioning our assumptions - has something fundamentally changed that we are skimming over or ignoring that changes the thesis.
2) Tail wagging the dog - By this I mean tax consequences. This has bitten me several times, both in the desire not to sell a winner due to capital gains, and the desire to unload it because due to a loss. (A corollary issue that MANY investors have to NOT sell their losers but instead to double down or think that it will come back (see 3)).
3)Fallacy of believing management - I've had several occasions where I questioned the investment, but held on with the believe that management knew something that I didn't. The latest (for me) is that I was a long time owner of OXY (Occidental), with a smallish position that I bought way back in 2005 (and on which I had a profit). Then they (OXY) got into a bidding war for Anadarko Petroleum (which I questioned) and even worse did the private high priced deal with Buffet. Had I done what I thought (this looks like a dumb deal) and SOLD IT IMMEDIATELY, I would have walked away with a profit. But no, I held it thinking management knew something about those assets and ended up losing money because of this. In then end, CEO's of companies are in it for themselves, and it is best that we as small fish investors remember this. (Not the first time I've been burned). A long time ago I would go to the annual meetings to see CEO's in action, and made very wise decisions based on meeting/assessing the CEO (both positive and negative).

Discipline is key - and my biggest failings in investing have been lack of discipline.

[brokrken]

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Originally Posted by copyright1997reloaded Discipline is key - and my biggest failings in investing have been lack of discipline.

For the longest time, my discipline has been to buy good companies and hold them forever. This has worked out very well for me and I have rarely sold anything. This is part of what is making selling any of these shares so difficult. I also have never been in the position where one stock has become such a large part of my NW, until now...

[OldShooter]

Quote:

Originally Posted by brokrken ... I also have never been in the position where one stock has become such a large part of my NW, until now...

Well, sometimes looking at these situations from a formal risk management POV is helpful. For example:

Risk: The stock price will be halved before I get out.

Probability: Guess 30-80% --or-- ??

Impact: Substantial alteration of my financial lifestyle --or-- no change in the way I live my life --or-- ??

Cost to Mitigate: Sell out now, forego the possible pleasure of a rise in price aka FOMO --or-- Buy time by writing calls until the stock is taken, backstop with a stop --or-- Enter a stop loss order and accept that it may execute on a transient down-blip or that execution will not be good during a serious price drop --or-- ??

People go nuts building big matrices of this stuff, but I think the primary value of the exercise is simply to organize one's thinking without including a lot of emotion. The other easy thing is to take the low hanging fruit where impact could be significant and mitigation is very cheap. That takes the wild card of probability out of the equation.

@brokrken, in your case I don't think we know much about impact. If NVDA is 10% of the $100K that is needed to support you for the next 10 years that is a lot different than the 10% being 10% of a few $millions. If the latter then this is more about ego and FOMO than it is about economics. IOW, the decision is unimportant.

[brokrken]

Quote:

Originally Posted by OldShooter @brokrken, in your case I don't think we know much about impact. If NVDA is 10% of the $100K that is needed to support you for the next 10 years that is a lot different than the 10% being 10% of a few $millions. If the latter then this is more about ego and FOMO than it is about economics. IOW, the decision is unimportant.

As I mentioned in the OP, the stock at the dime was valued at $227k, which was about 11% of my non-real estate portfolio. So, that implies a portfolio over $2M. So, you're right. A large drop will not impact my standard of living. However, considering that I want to retire in about 5 years, I guess it could cause me to work a few month longer than I'd like.

To your earlier point, I have sold some calls on half of my position, so we'll see how that works out.

[HawaiiShrimp]

Quote:

Originally Posted by brokrken I was extremely lucky and bought 400 shares of NVDA in 2010 for about $10 per share. A modest $4k investment. As of this moment, that investment is worth $227k!!! The problem (if we can call it that) is that it now makes up over 11% of my non-real estate net worth. Part of me says to sell it all and be happy I've done so well. The other part of me say that I didn't get to this point by selling it every time it had a nice run over the last few years. Help me see the light. I know I should take some money off the table. But the FOMO would kill me if it kept running.

My opinion is not financial advice. If it's my money:

- In a tax advantage account, trim down a little and redeploy to another potential stock. How much to trim determined by your risk tolerance level.

- In a taxable account, I will stay the course. No trimming.

I think NVDA has a lot of growth left (Autonomy, AI neural network, GPU etc)

Good luck.

[Montecfo]

Congrats on a great decision!

I personally limit individual positions to 5%. For that reason I would probably look to opportunistically sell towars that level.

If you would not buy the stock here, then I'd look to sell it all.

I do not own the stock so no personal view.

[phil1ben]

Warren Buffett: "Diversification is a protection against ignorance".

[brokrken]

The calls I mention a few posts back have now expired, so I'll sell some more for December expiration and see how that goes.

[braumeister]

This is an interesting thread for me, since I have a slightly similar situation.

I only own a few individual stocks, and I've always been careful not to let one get over 5% of my holdings. But I have one that has increased in value enormously and now accounts for about 6.5%. Normally I would sell some but I feel strongly that it will double or triple from where it is today, so I'm very reluctant to get rid of any.

My plan is to see if it gets to 10%, and if so I'll sell enough to get back to 5%.

What a nice problem to have!

[Texas Proud]

First, to be conservative you should never own a single company stock that is over 5% of your portfolio... if you want to be very aggressive, then 10%...


I would trim at minimum 30% of what you have... and up to 50%...


As mentioned, the next question is where do you put it...