You have a winning stock in your portfolio. What are your plans for it? Has it reached your price target? Are there new developments that would have you reassess reasons why you continue to hold the stock? Practical investors know that if they don’t keep up with their stocks, something unexpected can happen and flip their returns upside down. This is more relevant today, more than ever, given that information flows through the market much faster than at any other period in history.
That is why we monitor our investments like a hawk. Portfolio protection is as, if not more important than having picked the winner to begin with. Talyor Devices Inc (TAYD) and Educational Development Corp (EDUC) are two great examples of this. While we have spared no energy in talking about how we made money with those picks, we inevitably had to close our positions to lock in gains.
TAYD has been around for 56 years. The company manufactures shock absorption, rate control and energy storage devices for use in various types of vehicles, machinery, equipment & structures. We alerted our members to the stock at $15.34 because of a muted reaction to a strong earnings report. Keeping in line with disciplines to take profit on the way up and average down if the stock underwent an unjustifiable dip in price, here is how our history with TAYD played out as we disclosed our moves with GeoInvesting premium members.
TAYD – A Modest 22% Winner
- October 13, 2015 – Bought TAYD at ~$15 based on strong fiscal Q1 2016 results.
- January 25, 2016 – In an unstable market where shares of many stocks were punished, we used this as an opportunity to add shares on the cheap as shares pulled back to $14.
- April 13, 2016 – At around $16.50 per share, we took some profits off the table when the company reported strong fiscal Q4 earnings. Management commentary in the press was strong, but we noticed that sales backlog had decreased. We also noticed interesting verbiage buried in an exhibit attached to the company’s year-end 10K SEC filing. Investors may have missed this, leaving the door open for negative surprises:
“The lower backlog is due in part to the increased shipment volume and the Company’s ability to complete orders in less time. It also may represent some softening in both commercial and aerospace/defense markets, which hopefully will prove to be short term and related to uncertainty about how the U.S. economy will be affected by the outcome of the November elections.”
You know the saying: “Hope is not a strategy.”
- August 29, 2016 – We fully closed out our TAYD position at $18.75 (peak price was $20.45 earlier in the month), locking in about 22% in profits since our initial alert. We felt the shares were fairly-valued, so protecting profits was our paramount goal. We were also uncomfortable holding the stock into Q1 2017 earnings on the heels of a declining backlog.
If you’re keeping track, we held a good portion of our initial shares for 8 months. That’s 8 months of constant monitoring in case we needed to act on any developments.
Shares of the company are now trading for under $14.50 per share, a 23% pullback from our sell price. On October 14, 2017 shares closed down $6.50 (33%) for the day after the company reported horrible Q1 financial results and that backlog remained depressed.
We still like the TAYD’s management team and the overall theme of the company’s growth story, so it remains to be seen if we will act again. Soon, we’ll go over how high-flying pick EDUC more than exceeded our expectations.