Don't Fall in Love With Your Stocks...
July 19, 2025
Bears make money, bulls make money, pigs get slaughtered – that’s an investment bromide that is worth remembering these days as the stock market continues its climb. Several of the markets’ most watched indices have reached record, all-time highs. This kind of market action, and also when the market drops precipitously, stirs emotions in investors and investment advisors alike. It becomes difficult to sidestep the gloom or, in this case, the euphoria. Last month, most analysts and pundits cited a variety of data points to explain why, though there might even be a modest pullback in the 3rd quarter, historical precedents pointed to the markets finishing the year even higher than the current record levels. Hesitations are only very occasionally encountered these days.
What is true for market sentiment is even more the case for individual stocks. A number of factors have helped drive share prices of many companies to record highs, well beyond simply recovering from their April, ‘liberation day’ lows. In fact, the recent three month rally was one of the fastest ever market recoveries from a 20% drawdown. The gains have been substantial, the wealth creation significant. Is it reasonable to expect share prices to continue climbing another 10/20/50%...you really think so? I have mentioned complacency before…it appears to be even greater now, topped with a dollop of euphoria. The economy is strong, the tariffs are manageable, the tax cutting, deregulating, pro-business ‘big, beautiful, bill’ will light a further fuse of growth and prosperity. Of course, what could go wrong?
If you are reading and listening to all the optimistic chatter, looking for more cash to invest, please step away from your computer, do not touch that buy button on your Robin Hood trading app, don’t call your advisor to ask why there is still 6% in cash in your account. Collect yourself. Here’s some perspective...did you own Tesla as it hit $540, stayed invested as it descended and then climbed back to $490 just six months ago – after all it's going to $2000, right? Cathie Wood of ARK said so. I hope you don’t still own all those shares now, trading at $320. How about everyone’s former health care industry darling, United HealthCare? Trading at $595 just three months ago...you still holding on at the $282 price it fetches today? Or Paypal – the future of digital payments wasn’t it? A can’t miss at $310 a few years back…now $73. Possibly you got euphoric about Novavax shares during the Covid pandemic as they roared to $300 with their better scienced vaccine, going to reach $500, someone told me, once it gets EU approval…now $7. Yes, that is a $7 stock that you could have sold for $300 at one point. Finally, the true poster child of these cautionary tales, and one detailed here before, Cisco. Despite 25 years of consistent solid growth in revenues and record earnings, a much more successful and valuable company today than ever before, Cisco’s share price continues to trade below its all-time peak reached…wait for it…in January of 2000. That is not a typo.
Shares are not companies. They are representations of the value of a company and they can become unhinged from the underlying values. Palantir is a great company, creating great value, however valuing it at over 250x its current earnings is, frankly, absurd. That is not to say that at some point it might not be worth its current $360 billion market cap (it has $3 billion in revenues today…revenues, not profits). However, before that happens, there will inevitably be a rationalization of value and a share price decline. There are numerous other current examples that you can look at – Robin Hood, Coinbase, Coreweave, most of the cybersecurity company shares, the various meme stocks, anything connected to crypto, a variety of AI and quantum computing related companies… Bears make money, bulls make money, pigs get slaughtered.
You have a stock that has rocketed to a triple digit percentage gain? Great…pat yourself on the back, congratulate your advisor, love the gains, just don’t fall in love with the stock. Breaking up can be hard to do, yes, but it doesn’t have to be total…trim a little. Trimming is not getting out completely and if the shares run up another 50%, you are still in…and maybe you have done something good with the cash. Maybe you can offset the capital gains taxes by dumping a couple of losing positions, or you can sell some shares in an IRA account with no immediate tax implications. And, yes, maybe you will even have to pay some taxes. How I wish I would have had to pay taxes on the massive gains realized from selling some of our Cava shares when they unreasonably reached $172. A little bummed and lamenting my foolishness at being blinded by my own ‘love’ of the stock, I finally sold some at $135. How pleased am I now about those sales, and further trimming at $110? Very…the stock is trading for $86 today. We still own some too because we like the company and it is still growing – and a much better value today at half the price. Bears make money, bulls make money, pigs get slaughtered.
Be reasonable yourself, and encourage your advisor to be prudent. Take advantage of a great run…stay invested, just a bit less so. Reap some of your outsized gains and put the money to work elsewhere. We still have a polarized country, unclear and unsettled tariff policies, the unfolding of the reduction of the Federal workforce and the aggressive pursuit of undocumented immigrants, most of whom are gainfully employed and a force in businesses and local economies all over the country. Things will change. Uncertainty remains great and market sentiment can quickly turn. It doesn’t seem like a time to maintain an aggressive investment posture.
It is a puzzle for sure…when to sell and how much, what to do with the cash, how to minimize the tax consequences, how to participate in AI-driven boom to come without getting caught up in the froth. And this is another tortured segue to the article linked below I recently came across in the NY Times.
I have long been a fan of jigsaw puzzles and was delighted when I discovered the intricately shaped, wooden pieces and complex designs of Liberty puzzles. Now I have learned what puzzle hobbyists (and other fanatics with money to burn) really treasure – ever more elaborate, hand-cut wooden puzzles. And others made of titanium, with pieces so small the puzzles are sold with little tweezers. An interesting article...