I made money. I lost money. Take your pick of perspectives, but it may be best to pick both because both things are true. After a lot of research, analysis, and thought I wanted to pop myself in the forehead because my decision was so simple I overlooked it for days. On Monday June 7 I sold a small slice of my MVIS holdings. The answer is rarely all or nothing, and sometimes the important thing is to decide on what’s enough. Buy low, sell high? That gets a bit more complicated.
For those who haven’t been reading this blog for years and putting up with my MicroVision/MVIS posts, I’ve held the stock for over twenty years. Some are calling it a ‘meme’ stock, which is comical because the use of ‘meme’ wasn’t common back in 2000. MicroVision is a company that has had great potential all that time, several stumbles and faults, and may now be nearing significant successes or at least a significant buyout.
And then the market community found the stock, and not necessarily the company, for completely different reasons.
Over those decades I’ve invested a few year’s of living expenses into MVIS, (as with many to the unintended detriment of relationships) because I was and am so convinced for the technology’s positive disruptive potential. I think MicroVision can do to flat screens, what flat screens did to CRTs, to what CRTs did to paper printout. How many displays are there in the world? That’s a big market. During the spring of 2020, those tens of thousands of dollars had shrunk to a few month’s living expenses. A bad time to sell. In retrospect a good time to buy because the stock’s low was $0.15 and its new high is $28.00. I mention its new high because its all-time high is in the hundreds back during the Internet Bubble. Pop. Sigh.
I buy stocks to sell them, eventually. My book, Dream. Invest. Live., has that title because I see Invest as a bridge, a tool that helps (but does not guarantee) a person a way to get from their dreams to the way they want to live. If MVIS does well enough, I’ll have an opportunity to buy other stocks and will write about that buy side of the next deal. This post is about selling, selling to support my lifestyle, or at least pay my bills.
Selling is also one of the more common conundrums I see people posting about as their stocks move from low to high. So, rather than just talk about what I did, I decided to also describe what I didn’t do.
Selling everything does happen. If a stock or the company are no longer adding value to a portfolio or a stockholder’s life, it is common enough to sell everything. Selling everything certainly makes it easier to move on, be definitive and decisive. I’ve also done so to raise money for a downpayment for a house. If someone bought a stock to make money, and they can sell it for a profit, then that’s a success, not something to feel bad about.
As a stock’s price climbs there can be very good reasons to not sell, yet. If the sale is simply for managing a portfolio, then is there a better place to put the money? Answer 1) always. Answer 2) Always, but maybe that just hasn’t been found, yet. Answer 3) Cash is appreciated but it doesn’t appreciate, and may be a place to put things for a while. Besides, it is usually possible to buy back in. Stocks are liquid assets. That’s handy. A friend successfully triped their money and sold. Great. It was MSFT circa 1990. So, there’s that. I waited too long to sell a quarter of DNDN, and lost almost everything.
Selling nothing isn’t investing, unless the decision to not sell is simply to not sell now. MVIS has risen from $0.15 to $22. Great! But there are estimates (and guesses and hopes) as high as hundreds of dollars. If the money isn’t needed and losing it won’t affect anything, then the stock effectively becomes a lottery ticket. There are some investors who will also hold because they want the bragging rights (a share of SBUX at IPO, perhaps?) – or because they forgot (and that does happen.)
A BIT OF BOTH
Read stockholders’ comments on the discussion boards and find many experienced investors maintain a core of share they hold, and then trade with the rest. For active traders, those who understand puts and calls, and those exploring other strategies it is one way to have half the cake in the freezer while the other half becomes a long line of desserts.
DECIDE WHEN TO SELL BEFORE BUYING
If a stock looks good enough to buy, there’s either an implicit or explicit notion of when to sell. One strategy is to decide to sell at specific prices, or at specific profit points. When my portfolio was larger and more active (long story, but check My Triple Whammy for a perfect storm of bad luck), I preferred to buy, hold, and then sell about a quarter if and when a stock rose four-fold. I’d get my original investment back to reinvest. The rest would be profit. It’s easy to imagine other scenarios merely by setting different percentage profit targets.
DECIDE WHEN TO SELL WHILE HOLDING
After twenty years, those original targets needed updates, for me. I’ve bought MVIS so many times that I could assign different targets for each lot, group them together, or whatever. Usually such decisions are at least somewhat based on expectations of future value. MVIS is such a spotlight stock currently that quantitative analyses of the company or the stock may be insignificant relative to emotional reactions (irrational pessimism followed by irrational optimism), or relative to other agendas (like attacks against shorts regardless of the stock.)
For me, the current investment community mindset made me greatly simplify some sell targets: even numbers ($100, $200, $300), as well as tax breakpoints (then non-IRA losses can be balanced within $3,000 of the gains), as well as a few dream numbers (replace the old car, get a new car, fix the house, buy a dream house, work less, or re-retire.)
And don’t underestimate the anguish of trying to understand which shares in which portfolio with which set of tax advantages and disadvantage…
THEN CAME THE HEADACHE
Look back through that list. Consider the alternatives for the company and the stock and the taxes. Would any of the four main vertical product lines succeed independently, or be part of a partnership, or be sold off?
There are too many scenarios when considering each of those combinations. Then consider the influence of the large customers, partners, possibly acquirers. If Microsoft bought all of MVIS to 1) preserve their access to augmented reality engines while 2) blocking Apple, Google, Tesla, Amazon, and many of the major car companies from MicroVision’s LiDAR technology or MicroVision’s display technology or the rest of MicroVIsion’s patent portfolio or some combination – would a strategic bidding war escalate MVIS’ share price? Would Amazon do something similar for a new display for Alexa? Tesla and LiDAR against the rest?
How serious, powerful, and committed are the new shareholders at either supporting the company, or the price, or their battle against short sellers? Short squeezes are less common, but maybe that’s changing as new battlegrounds seem to opening.
Then put the two together: two simultaneous battles: companies against companies, shareholders versus shareholders, shorts versus longs versus hedgies. Oops, that went to three from two, but that’s how complicated the situation has become.
WHAT I DID
I agonized. There must be a solution. Normally I’d prefer to hold. I’ve held for over twenty years. Now didn’t seem to be the time to sell, well, maybe a little. But after considering so many scenarios, few reduced the stock price significantly. Hold – from the perspective of the stock.
I agonized. Separate from the stock considerations there is real life. Bills must be paid. A pandemic didn’t help. Real estate is booming! – as long as realtors represent the seller, or the lone lucky buyer. I tend to represent buyers. Too many offers from folks with mortgages who lose out to people with cash offers over the list price. Sign. (Required disclosure: I am a real estate broker with Dalton Realty, Inc. on Whidbey Island. http://whidbeyrealtor.com/) Sell – from the perspective of my bank account.
MVIS has done well, climbing from $0.15 to $22, but selling all would be a small gain after all of these years and those original costs bases; and I suspect the stock will continue to rise. But it looks like it may take weeks or months. Selling nothing was an option, but too many real estate deals fell through. Those bills won’t wait.
Then came the dope slap to the forehead. Rather than selling all or nothing or according to some preset schedule and strategy, I realized I could sell just enough to cover a couple of months of bills. I’d still have a couple or a few years of living expenses in MVIS, and the majority of my holding would still be able to rise.
CONCLUSION (For Now)
I write this, not as a way to structure when or how to sell, but to point out that over forty years of investing (MVIS wasn’t my first) deciding when and how to sell can still be complicated. If you’re new to investing and this seems difficult, that’s because it is. Congratulate yourself on being perceptive.
Now, about that perspective. I sold a slice of MVIS at ~$22.50. For a stock that was at $0.15, that would sound like a great gain. But, I lost money. That sale represents a loss about as much as the cash I gained from the sale. My cost basis for that purchase was about twice the current price (~$55 for one of the purchases.) Because it was in an IRA there’s no balancing of gains and losses, only the extra pain of having to take money out of my IRA, pay taxes on it, just so I can pay my mortgage et al. But I’ll be able to pay those bills because I made money, a sale is a sale.
Did I make money? Yes. Did I lose money? Yes. Welcome to personal finance.