It’s been a wonderful few years to be an investor. Thanks to a crazy 2008/2009, and a subsequent raging bull market, many people have hit some home run investments. That’s great! However, this can also lead to a bit of a pickle. Maybe you’re unsure of where you need to go from here. So, you just hit a home run investment. Now what?
Some Home Runs
It’s been hard for me to watch the market the last couple of years, knowing there were so many opportunities that I ultimately didn’t pull the trigger on. I was new to investing, and quite frankly completely scared of the market, like many others. I left my money just sitting in savings, and missed out on some really great opportunities. Here are the four companies that I considered buying above more than any others at the height of the financial crisis (scout’s honor).
You didn’t click this article to read about my could-of would-of should-of’s. You clicked this article because you did hit the home run. Your investment has had monster returns. Congratulations.
What do you do now? Investors tend to see the issue one of two ways:
- Sell and lock-in current gains.
- Take a gamble and keep hoping the stock goes up.
Neither of these is completely adequate in helping us gain the results we want. By selling and locking in your gains, you are also locking yourself out of future gains. However, I don’t believe that staying invested needs to constitute a gamble. We should never gamble away our hard earned cash.
An alternative option would be to ask yourself: “Would I invest in this company at the current price and in the current situation?” If you can answer that, then you are a long ways towards knowing whether you should hold or sell.
So what about these specific companies?
If Starbucks Corporation (NASDAQ:SBUX) isn’t a company you want to hold on to, I don’t know what is. After founder Howard Schultz took the company back to it’s core business in 2008, this company has been growing the right way. 2012 was a record smashing year in key metrics like revenue (+14%), earnings per share (+10%), and same store sales (+7%). And now, Schultz has laid down the gauntlet for growth:
…we anticipate having 20,000 stores on six continents by 2014. Additionally, over the next five years, we plan to open 3,000 new stores in the Americas region alone.
In my opinion, there is absolutely no reason to sell Starbucks Corporation (NASDAQ:SBUX) now. Locking in gains now will surely lock you out of participating in the incredible success the company is positioned to have.
Ford Motor Company (NYSE:F) has been doing very well ever since the financial crisis. But does that mean that they are going to keep doing well? There are a couple of points of concern.
They are behind competitors in China, and are spending a lot of money building five plants to catch up.
A good CEO goes a long way. There are rumors that Ford Motor Company (NYSE:F)’s Alan Mulally, widely praised for turning the company around, could retire.
The falling Yen. When the Yen falls, Japanese car makers win big on cars sold in the United States.
What does it all mean? Well, the concerns listed above, with the exception of Mulally, are external factors. I think a lot of people will agree with me when I say that internally Ford is strong. As an investor, I would prefer to invest in a good company in tough circumstances than a weak company in good times.