March 27, 2015

Exiting $SONC after nearly 8 months

I have finally exited the oldest position I have ever held in a stock.  $SONC had been up more than 60% before it's earnings release.  By many accounts, the numbers weren't particularly bad, but it is clear that people expected more for it's current valuation.

When a stock jumps up that high and then comes back down, it can become very difficult to decide what to do with it.  On one hand, the uptrend was still there.  At the same time there's the temptation to hold and hope you get that 12% drop back via a bounce.  But then what?  It's unlikely you'd sell after the recovery.  If you are going to hold, hold for the right reason, not because you hope for redemption.

It was a tough call, and if I were a pure trend follower, I may have held onto it, depending on my rules.  Even then it broke several likely ones, including trailing stop and moving average stops.  But I'm not a trend follower anymore, though I still give considerable thought to what I want my max draw-down to be, and at what point I should exit and re-enter should the worst happen.

Because my ultimate goal is to hold no individual companies, I don't feel reliant on holding any of those stocks.  Also, at a 50% gain, one has to wonder how much upside is truly plausible in a name that is not exactly a growth stock.  Honestly it's really incredible that it's price rose as much as it has.  I like Sonic, I really do.  But it's not taking over the world of fast food.

So goodbye Sonic, it's been a fun 8-month ride.  I nearly exited you twice before and would have been justified in doing so.  Now it's time to move on.

With it's departure I have just three individual company stocks left.  $LMT, $COST, and $HD.

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