written by reader Max price a stock can reach?

By bradshawrk, June 1, 2021

I’m sure I’m one of “Few” that don’t know this, but… How do you determine or calculate when a stock has reached its Max potential(if there is such a thing) How do I know when to sell & look for something with a bit more growth ability. Thanks Rick B.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.



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Travis Johnson, Stock Gumshoe
June 1, 2021 12:18 pm

There is no max price.

If you’re a trader, you’ll go into a position knowing when you intend to get out of it.

If you’re a value investor and calculate a fair value for the stock you will buy it some percent below that level and sell it some percent above that level.

If you’re a momentum trader, you know that the best indicator that a stock will go up is that it’s at its 52-week high.

Personally, I think of myself not as a trader or a value investor but as an accumulator. I like buying and I hate selling, and most of my positions are entered with the intention of holding them for at least 5-10 years… though I do change my mind about those stocks sometimes, and there are some positions that I go into with shorter-term intent.

If I like a company and it has risen dramatically, and gotten to a valuation that I can no longer reasonably justify as rational relative to my expectations for the next five years, then I might take some portion of profit off the table, though usually only when a position has grown to be an outsize part of my portfolio (5-10% or more)… I’ll usually do that when the stock dips by 10% or so to indicate to me that whatever wild momentum ride it was on could be slowing. Unless we hit a real “stop loss” level, that profit taking is likely to be small — I try to both buy small and sell small, since I’m unlikely to be precise about either entry or exit points and spreading the decision out over time will probably give me a better result.

There are lots of opinions on this, but if you’re not trying to follow a disciplined trading system to get in and out of stocks in a relatively short time (less than a year), most of it comes down to your conviction about a company’s future potential and the amount of risk you can tolerate. In many cases, if the stock market is telling you that you were right about a stock it’s best to just listen.

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Simon Sapsford
Simon Sapsford
June 1, 2021 1:16 pm

My personal window has fallen to 3-7 years for the accumulation phase. I do maintain positions longer than that but only if I feel like they are a buy for another 3-7 year accumulation phase. My starter positions are around 1/3% and I will add to winners but rarely add to more than 1.5% total. If you get a 10x and 1% has grown to 10% I may take 1/2 the money off the table for new growth positions. It is easier to find 10 baggers than get a 100 bagger. But if it does do another 10x the 5% I kept goes to 50%. Nothing to sneeze at but it just doesn’t happen that often.

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June 1, 2021 2:30 pm