Always Be Buying, Always Be Selling

I sold three gold stocks in the Maven portfolio last week. I explained each decision but afterward, I realized I could have given better big picture context.

Gold stocks have been trending down for months. It feels like a terrible time to sell, cause this has got to be the bottom, right?

So why did I sell three stocks?

As I went through last week, there were reasons specific to each stock. One had disappointing drill results, though it will drill another good project this winter. A second had a loan fall through, which made me think through what they will do from here and how the market might react. And a third, which has been slow on getting a mine plan done, released some data that helped me realize the long-delayed mine plan will not likely attract much attention anyway because it will just be small.

Those were the specific reasons. But it took one big picture thought to get me past my hesitation to the Sell button.

The thought: Always be buying and always be selling.

OK, the grammar is hard to abide by. But the sentiment matters.

We are only engaged in markets, like mining, when there is a fundamental reason to believe in the upside ahead. The thing is, that rationale must survive repeated ups and downs because no bull market goes straight up. In fact, metals bull markets usually go up, then fall and stumble along for a while, then go up again, then slide back once more before finally going on a real run.

The sideways and slides within that pattern certainly last months and can last years. We feel that right now – precious metals have been sliding for a year, yet I doubt you’re reading this unless you, like me, think we are in a gold bull market.

So. If this is a bull market, there is another leg up ahead. And if that’s the case, then there are portfolio moves to be made whether the market, at the moment, is running or sliding.

When things are gaining, it’s key to keep selling. Take profits, whether you pile them back into explore-co’s or pay down your mortgage. And do buy back in, as long as you don’t let excitement push you to buy when things are overheating.

It’s fun to think about buying and selling when the market is rising. But what about now, when the market has been crappy for a year?

Always be buying and always be selling

A market that has slid for a year makes for some great buys. Right now that list runs from major gold miners and royalty companies through best-in-class developers and down to explorers. They have all been hammered and – if you think there is another big upleg ahead for gold – they represent great value opportunities. But where to find the cash? Most of us have to sell in order to buy. And it is not fun to think about selling when the market is like this.

But Always be selling. The starting point here is: don’t get frozen by optimism. Yes, if the market were to turn up tomorrow then most of these stocks would rise, maybe a lot. And yes, any one of them might put out news tomorrow that sends it skyward. But be real.

Think about each stock and the likelihood of such news, both that they have something big to announce and that the market cares. It’s always hard to stand out and it’s even harder when a weak market has pushed the bar for Caring really high.

Then think about the overall setup. When things have been falling for a year, when sentiment feels broken and months keep passing without things turning up, it’s easy to think This has to be the bottom. It can’t get any worse!

But it can. Remember, I’m a gold bull. I think gold is going to go on one heck of a run in the next year. But even though I really want that run to get going, I don’t know when it will go. Things were good yesterday and today, so we might well have a fall run. Or the run might start next month if the Fed starts tapering its bond-buying program. Or it might not start until Q1 when sentiment is usually good. Or it might not even start until next fall. Timing is another 7 whole topics. My point right now is that gold could well slide more or again. So do not hold stocks because you feel like this has to be the bottom and it seems your stocks can’t possibly lose more. As you’ve likely experienced over the last few months: they can.

Hold stocks that you love, where you think the story is compelling and the execution is good, even though they are down because of the market. If you love them, you’ll be happy you supported them in the bad times and still own them on the way back up.

But stocks that you don’t love, where the story has slowed or execution has been lacking or results haven’t impressed – think about selling. Even if you’re down. I was well down on two of the three stocks I sold last week but, knowing the market could well slide further and the bar for impressing the market is very high, I didn’t want to own them anymore. So I liberated the cash I still had in those positions so that I’m ready when I see the next great buy.

Because there is always another good buy. And it’ll be better than the stocks in your portfolio that you just don’t love anymore. You know what I mean. So, accept the loss, liberate the cash, and move on.

Always be buying and always be selling. If not, you are frozen – and whether markets are moving up or down, that’s never a good thing.