Price Targets

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4th Dec '20 by Ilkleyneil

8 comments 839 reads

Hi Everyone,

For years I've repeatedly made all the investing mistakes that everyone warns about. Then 2 or 3 years ago I happened upon Stockopedia and I leaned a bit about discipline, rules, analysis, reserach and so on. Since then my experience has been largely positive and I've been making money for the last couple of years, which is great. I'm pretty confident that my stock selection is generally sound and my rules around loss making stocks seem to be working reasonably well too. However, my big problem is when to sell the winners and how to reach a broadly reliable price target at the time of purchase. If I'm searching for the impossible here, that's fine but if you have some ideas and advice I could consider, i would be very grateful.

Many thanks,

Neil

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Ilkleyneil

Premium Member

8 comments

StudyingHard

4th Dec '20

I have one trick that might help you.

Look at your winners, and ask yourself...which of these would I be comfortable investing another X amount of pounds into at the current price? (x being whatever your usual investment size is).

If the answer is that you wouldn't be, or would be very dubious, or would rather put it somewhere else, then you should strongly consider selling your position.

"But I think there could still be more upside to this and it's been doing very well!" there might be more upside to it, but you clearly don't think so strongly enough to put fresh cash in at those levels.

Then of course you have P/E, P/B and what is very big for me, debt levels.

If your stocks are more cyclical in nature, you might also want to consider selling positions trading at fairly low P/E's if the cycle's are peak. For example, if you're in a company heavily reliant on a specific raw material and said raw material is trading at peak prices for that companies profitability, it's probably a good time to get out.

If you get out and the stock keeps going up, don't feel bad. Just remind yourself that you got out with a good profit and even casino patrons some times win big, but long term they all get shafted and long term is the only game.

I'm an amateur of course, so take what I say with a grain of salt.

William K

4th Dec '20

There is probably no absolute answer to this question because every share is different and every trade is different. What I sometimes do is to put a stop loss a couple of percent under the price when the price has gone up a respectable amount to lock in the profit. An alternative is a trailing stop loss from the outset, although that's something I confess I don't do often.

Jeffvshepherd

5th Dec '20

As long as the company is putting in good numbers and the outlook is good then you could hold. Sell when the numbers and outlook change. To me, that is better than trying to set price targets.

Macro

5th Dec '20

Your post is titled "Price Targets", and the body of your post is mainly about "When to Sell" - subtly different.

1. Price Targets (at Trade Entry)

You could use some of the following to give you spatial awareness:

- Fibonacci Extensions: https://www.investopedia.com/t... . Some charting tools do not support Fibonacci extensions or even Fibonacci retracements. A simple spreadsheet to help you plan your trades can easily incorporate these and other useful measures such as reward-to-risk ratios, entry and stop levels and position sizing.

- Projections from Pattern Entries

-- Cup and Handle: Target is the projection of the depth of the cup from the rim. https://www.investopedia.com/t...

-- Flag: Target is the height of the pole added to the breakout of the flag: https://www.investopedia.com/t...

-- Channels (of varios types): Buy after a successful retest of bottom of channel, sell after an un-successful test of the top of the channel.

etc etc.

2. When to Sell

Many many to chose from. Two of my favourites:

-- Chandellier Exit (and Entries): See https://school.stockcharts.com...

-- Profit Locker: A proprietary Vectorvest method that allows you to set an arbitary target and a trail % and the trail % is narrowed for you as you get closer and closer to the target. Once the target is reached a minimum trail is maintained to allow the stock to run against a much narrower stop.

Ilkleyneil

9th Dec '20

Marco, Jeff, Wilconz and Studying...

Thanks very much for taking the time to respond. Food for thought.....

raggedtp

14th Dec '20

Hello Neil,

I don't buy without deciding a price target. I now download my portfolio regularly into an Excel spreadsheet which has extra columns to the right, which contain price target, a formula of that target multiplied by the actual shares, and that target divided by the current share price, expressed as %. Sum the totals at the bottom of course. And look down that once a week.

That way you can see what you're aiming for, what it really adds up to, and how far away you are. By doing it every week or so you get to question yourself about your target, which makes you revisit your assumptions. And you see the ones that really matter to your growth performance; sometimes a surprise when you see absolute numbers.

Oh, and every 2-4 weeks I copy the sheet to a new tab in the Workbook, so I can flick back to review my history.

You get to learn about yourself as an investor, and also, after a time, if you get close to the target, you might shift the target rather than sell the shares, as I have down with, for example, Vietnam Opportunities Fund, £VOF.

Not clever, but the repetitious discipline has helped me anyway in this horribly volatile year!

Ilkleyneil

18th Dec '20

Thanks JTG - appreciated.

wardcrawford

18th Dec '20

I'd think about it a little differently; if you rebalance your portfolio on a fairly regular basis (I do it every couple of months, with a +/- 20% variance from the assigned weightings as my trigger) you will tend to lock in a good chunk of your 'winners' while allowing them to run further. It also enforces good discipline to review every share in the portfolio (supported by the Stockopedia ratings!) for sometimes the method will tell you to buy more of what the market is avoiding. I read somewhere that such rebalancing adds an extra 0.8% or so to average annual returns, but maybe that is a subject for another thread...

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Ilkleyneil

8 comments

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