4-12-22: When to Sell Great Stocks…? (Perhaps Never)

by Jason Bodner

April 12, 2022

Life is a collection of choices. Sometimes we make good ones, sometimes bad.

Uncertainty causes worry, which sometimes makes us fumble… sometimes spectacularly.

Take Ronald Wayne. He worked at Atari with two guys named Steve. The three of them started a company called Apple. The two Steves became well-known: Jobs and Wozniak. Wayne was a third (10%) partner. He worried when Jobs took a $15,000 loan for a purchase-order. All three partners had to personally guarantee debt. Ron didn’t like the setup and sold his 10% stake back to the Steves for $800.

His worry over uncertainty cost him dearly. His 10% stake in Apple would be worth nearly $300 billion today. To add insult to injury, he sold the original contract the three signed for just $500. It was later auctioned for $1.6 million. Wayne retired to a trailer park to collect stamps and play penny slot machines.

I’m not bashing poor Ronald Wayne, but what can we learn from this?

Everyone wants to make money. I can’t think of anyone I know who wants to lose. But ask any athlete or parent and they will tell you: There is value in losing. We can’t learn to win without learning from losses.

When it comes to investing in stocks, there are plenty of chances to lose. But we only lose if we sell at a loss, which brings me to my next point: Selling too soon can be a huge mistake – think of Ronald Wayne.

There are times in the market to play for certainty, and there are times to accept uncertainty. Now is one of the latter times, so let’s examine the market’s recent movements and try to devise a plan for tomorrow.

The one thing I want you to avoid is making a premature “sell” decision.

In the stock market, I see glimmers of positivity. The Big Money Index (BMI) has been on the rise, and the really good news is that it’s now at levels not seen since mid-November, before the tech slide began.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Looking at individual stock buy and sell signals, we saw some selling last week. But some consolidation was expected after a big bounce from the lows, and the selling seems small in comparison to months past:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Broadly speaking, the market has firmed up and money flows are going back in. I’d like to see higher lows and higher highs to feel more confident, but I like what I’m seeing.

That’s good news for sure, but the bad news is that the buying is in defensive areas, while growth sectors that once led us higher are still in a quagmire. Last week saw big buying (left) in defensive areas, like Health Care, Staples, and Utilities. Selling (right) was in Financials, Industrials, Discretionary, and Tech:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The good news is that tech selling last week was far less than observed since the beginning of the year:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

That’s good because tech represents growth. The bulk of the large scale selling of growth is over for now. But the bad news is the market is positioning for a recession. Just the word recession elicits a frown emoji ☹. But let’s be frank: Prices can’t rise forever. Who wants to pay $150 for a pack of paper towels?

There is too much negativity in the world these days, but Jim Cramer rightly says: “There’s always a bull market somewhere.” The bulls are raging for sure. We see robust strong markets in Energy, Utilities, Health Care, and Staples. I also have my eye on fresh follow-through buying in Real Estate:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Sadly, the bear markets are in Tech, Discretionary, and Communications.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The remaining sectors of Financials, Industrials, and Materials are in range-bound “no-man’s land:”

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

We can see this reflected when we look at the average scores of all of the 6,500 stocks we look at every day. By doing this, we can get a distribution of strengths and weaknesses.

Check out how this table mirrors the charts (above) for the strongest and weakest sectors:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

While the market chops along skittishly, we’re all left trying to decipher what comes next. But how important this “next” is will be entirely in the eye of the beholder. The market will resume its uptrend at some point. We will get past this, and we will prevail. It’s the American way, and I’m betting on America. That’s why throughout this entire sell-off, in my personal accounts I haven’t sold a single share.

I am still long some of the tech stocks that have been sold into oblivion:

To show why, I looked for the 50 most frequently occurring top 20 stocks of 2020 to build a model portfolio for 2021. These were the returns: Up big, then down, but still net up.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The electric blue line shows how these outlier stocks outperformed the SPY by a factor of 2 at its November peak and are still outperforming the S&P 500 ETF by 50%.

A Modern Apple-Type Example – Nvidia

For an idea of the power of holding an outlier stock, I point to Nvidia (NVDA). The following chart shows NVDA’s Top 20 buying instances. It first appeared at $5.52. NVDA now, including the pullback, is $242.08 – a 4,286% gain. But during that rise, it had several deep pullbacks.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Volatility rocks everyone, but it also offers opportunity. Mass selling of fundamentally superior stocks are excellent long-term buying opportunities. Again, looking at NVDA. We see Big Money Buys and Sells.

Look at how the green Big Money buys lift the stock:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Now let’s remove the Buy signals:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Imagine buying red sell signals on a fundamentally superior stock like NVDA in volatile markets?

Now imagine selling red signals. Not a smart move.

I came across an unattributed quote: “Never make permanent decisions based on temporary feelings.”

I bet Ronald Wayne might agree with that advice now.

Navellier & Associates owns Apple Computer (AAPL) and NVidia Corp (NVDA) in managed accounts. Jason Bodner does not own Apple Computer (AAPL) and NVidia Corp (NVDA) personally.

Important Disclosures:

Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

• ETF shares may trade above or below their net asset value;
• An active trading market for an ETF’s shares may not develop or be maintained;
• The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
• The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
• Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.