Blasphemy-"Trading" a Core Position

[E. Nashton]

Just curious how many folks here actually trade in and around a core position. I found after holding a position for years you not only know the business well but you sort of know the pricing behavior as well. Some of that is of course related to valuation floors but others are purely just trading behavior/technical points. 

 

Anecdotally, I have heard of some folks making a decent living off of doing this with BRK and XOM over the years. Personally, I have done decently well with this approach (i.e. FFH, DIS, BRK, some smaller REITS, etc). Some smart aleck will point out that it might be more profitable just sit on these positions and let it compound ....probably right if you're looking at compounders...

 

Just curious and appreciate anyone's thoughts, personal experience, general strategies.

 

Thanks! 

 

[KCLarkin]

My hitting percentage on trading around core positions is pretty good. But the opportunity cost of the ones that "got away" is so expensive that I can't recommend this strategy. In other words, it takes many, many singles to make up for the home runs you miss.

 

But as you note, it depends on your investing philosophy and psychology. The stocks you mention seem "tradeable" since they are unlikely to run away from you. And when they do run away (e.g. Disney in 2021), the signal for profit taking is pretty clear. 

[TwoCitiesCapital]

2 hours ago, Dean said:

Just curious how many folks here actually trade in and around a core position. I found after holding a position for years you not only know the business well but you sort of know the pricing behavior as well. Some of that is of course related to valuation floors but others are purely just trading behavior/technical points. 

 

Anecdotally, I have heard of some folks making a decent living off of doing this with BRK and XOM over the years. Personally, I have done decently well with this approach (i.e. FFH, DIS, BRK, some smaller REITS, etc). Some smart aleck will point out that it might be more profitable just sit on these positions and let it compound ....probably right if you're looking at compounders...

 

Just curious and appreciate anyone's thoughts, personal experience, general strategies.

 

Thanks! 

 

 

Pretty much the only trading I do. 

 

Some of my longer term hold positions have been dogs (Fairfax, Altius, Fairfax India, etc), but have reasonably average/decent returns on them selling portions when they've popped and repurchasing shares they drop. 

 

I typically am comfortable doing this with ~40-50% of the position and will often times ignore my self-imposed position limits for a short-term add to core positions since the intention is to sell on any improvement of oversold conditions. 

[Gregmal]

I am probably more multiple personality disorder in terms of some of the variances and contradictions with my investment strategy. But a huge part of that is compartmentalization. More core stuff I almost never trade. Just look to buy stuff you can own for decades and always be accumulating. 

[scorpioncapital]

I usually trim after buying a little more. But I am skeptical to go too far in either direction of the core position so one could argue once you reach the resting place there is not much to do short of the rare moments of a major crisis where you consolidate the best positions on the upside.

[SharperDingaan]

For us, it's typically a round trip on 50% of the underlying position.

MTM adjustments net out on the resultant swing-trade cash/50% position pair, but we're up cash if we can repurchase for less than we sold at. We win more times than we lose, but it can occasionally be quite some time before the trade is closed out. Best results are when you can trade industry seasonality.

 

SD

Edited September 20, 2022 by SharperDingaan

[Jaygo]

I do it all the time in my registered accounts. 
 

I figure that if I can lower my cost or get more shares than it’s a bonus. 
 

I only do it with holdings that I intend to keep forever so if I’m loosing on a trade I don’t care one bit. I’d say I’m at about a 70% success rate. 
 

I do it with brk, Amazon, suncor and csu most often. I have done it with msge a few times as well which has shaved about $16 off my average of $66. 
 

one success story was that I sold brk at 323 or so. Sweated hard as it hit 360 but got back in in the low 300’s. Made about 4K round trip. I now have 13 extra shares in my long term holding. 
 

 

[CassiusKing1]

The only position I have done this with is BRK.  And have had good success with it.  The stock value is discussed here and one can easily follow it and trade it.  My biggest was on July 9, 2020, didn't catch the bottom, but knew it was trading at a very attractive price.  Was very comfortable making that purchase knowing the stock value and history.  

Going to be nibbling at BRK again as the price allows.

[SharperDingaan]

4 hours ago, Jaygo said:

I do it all the time in my registered accounts. 
 

I figure that if I can lower my cost or get more shares than it’s a bonus. 
 

I only do it with holdings that I intend to keep forever so if I’m loosing on a trade I don’t care one bit. I’d say I’m at about a 70% success rate. 
 

I do it with brk, Amazon, suncor and csu most often. I have done it with msge a few times as well which has shaved about $16 off my average of $66. 
 

one success story was that I sold brk at 323 or so. Sweated hard as it hit 360 but got back in in the low 300’s. Made about 4K round trip. I now have 13 extra shares in my long term holding. 
 

 

 

We take a very similar approach, but unless we're digging out from a too high cost base - we take the cash gain off the table.

At the 50,000 foot level; if you reinvest the cash gain in more of the same, there was no net benefit to your casino win. You just have your original capital at risk, plus your new gain, over a larger share count at a lower cost/share. All else equal, as the cost price declines, the sooner you get into the green again.  

 

But take the cash gain off the table and you have the same share count - but on the original capital at risk MINUS lifetime net gains to date. Original capital at risk declines over time, until eventually there is NO original capital at risk  Identical to the payback period of a corporate investment, with proceeds either repaying debt used to make the investment, or funding new/replacement investments.

 

Successfully repeat over time, and in most cases you get BOTH a growing equity portfolio and a rising cashflow.

 

SD

[crs223]

instead of selling your shares when you think the price is high, and hoping to get back in when the price drops… why not just forever sell covered calls on your position?

 

In both cases you lose money when the stock skyrockets and you have to buy back at a higher price.

 

I don’t know anything about trading and I never do it… just curious.

[Jaygo]

1 hour ago, crs223 said:

instead of selling your shares when you think the price is high, and hoping to get back in when the price drops… why not just forever sell covered calls on your position?

 

In both cases you lose money when the stock skyrockets and you have to buy back at a higher price.

 

I don’t know anything about trading and I never do it… just curious.

 

Covered call who? I'm more than happy to pick up dribs and drabs of extra stock here and there. The main reason I do this with my boring stalwart holdings is because Im accumulating them and they dont tend to move too quickly on news so its more market sentiment timing and less business items moving the stock. Realistically if Brk ran away and we were in a bull market id just buy it higher and not worry. I originally bought in the low 1 hundreds and up and up since then. 230 before covid and 168 during. Higher or lower i dont care. I just want the total number of B shares in my hands to go up year after year. These trades make that happen more often than not.

 

My new shiny object is a brand with alot of volatility outside of market sentiment so I wont dare trade it. I expect to buy up and down from here for the next decade as the market whipsaws and it will most likely whipsaw more than the market. The idea is accumulation so I wont trade it since it could shoot up materially and i dont want to be faced with some sort of mind freeze.