While the market continues to press new highs and the largest of the large caps refuse to give up significant ground, I've watched a lot of carnage unfold beneath the surface.
Although the index numbers in 2021 can make it appear similar to 2020 on the surface, I've certainly seen fewer victory laps and heard about return conquests that reminded me of the dot-com boom. While many traders I know have some big winners, they also hold some decent disappointments in their portfolio.
There comes a point when sometimes you have to cut bait with a holding, even if you don't agree with the price action. For instance, I'd been holding a small position in Xeris Pharmaceutical ( XERS) . Over the past month, it has essentially been a straight line lower. On the plus side, I hadn't been in it for an entire month, but on the negative side, it's not like I had just purchased it yesterday or this morning, either.
The position, like several other small-cap names I still hold, has become an albatross around performance. Unlike some of the other names I own, I didn't have the same conviction or deep knowledge about the company and its long-term prospects. I know Rev really likes this name, so I would defer to him on the long-term prospects. It is not that I'm bearish on the name nor would I short it but I reached a point where I needed to cut some dead weight.
And cutting dead weight can be freeing.
Admittedly, hitting the sell button hurts. The day or two following the sell can also be rough, especially if a loser you sell immediately moves higher; however, there's a lifting of a weight off your brain.
If you find yourself with too many weights, you'll never see clearly. And that's what bearish action can do. It wears you down day after day. It's not a jump scare, it's a long, depressing horror drama that never lets you see the monster. It's just there, lurking constantly. You want it to jump out. You want to see it. Instead, all you get is repeated dread. That's the feeling of a stock just dripping slower every day. They don't call it death by a thousand paper cuts for no reason.
Sometimes simply cutting one name in a group that is acting like that will lift enough weight from your mind that you can analyze everything else better or it can lift your cash position to a level where you can stop watching the day to day action and focus on long-term opportunities. And this may be a big need for anyone watching their portfolio underperform while the broader market runs away. Just something to keep in mind if you are heavy into the small caps at the moment.
