⛏ Reasons to NOT sell on a double

Greetings Sunday Driver Contrarian,

This is The Next Big Rush, a daily newsletter to keep you informed about the world of mining/energy investing. Where we come together to loaf around. 🍞

Here's another letter about dough from a reader:

Dear Uranium Diamond Hands,

There’s an old belief in the high-risk investing world (i.e. mining) that you should sell on a double, retrieve your initial investment and save it for another opportunity. While it's an okay idea and I respect those who abide by this rule of thumb, I do not do it.

Why?

Because a lot of projects and companies don’t work out, ones that do need to earn you multiples to make up for your losses.

And that’s why selling on a double doesn’t make sense to me. A double means that the story is working out, and it’s somewhat likely to go farther. On a triple, it's much more attractive.

You may find it fits your style, so don't take my word as gospel.

Bottom line is, the fear of missing out is close to a malfunctioning of our brains, so we must deal with it head on.

Here are five other ideas:

💡 I like to buy undervalued stocks, but that needs to have a number attached to it. In other words, if I’m buying a developer, once the market cap reaches its NPV, I consider it to be fairly valued. Meaning, there’s no reason for it to appreciate. Then I sell.

💡 I compare my holdings to other companies - what does company A have that makes them better value or more prospective than company B? If for example a developer is expecting a re-rating from becoming a producer, as they should, how are similar producers being valued?

💡 I may commit to always selling losers before year end to book those losses - sell the gains proportionately and ask myself if I want to reinvest in the same companies - I find that if I'm out of a stock, I may not want to come back, and that’s my smarter self telling me it’s not a great deal.

💡 I may have a financial goal that I'm happy with every year. I might sell a portion of the gains (pre-defined) when I hit it, and everything else is gravy.

💡 I sometimes simply watch my stocks, and when they don’t make new highs in X months, I sell a portion. I can reinvest in the thesis in names I find more undervalued.

Hope this helps!

The Editor,

P.S. If you're reading this, let me know which of these 5 ideas best resonates with you. I promise to read them all, and will keep it between you and me.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.