Sometimes, you have to wait.
I know investors and traders don't want to hear that now. We've gotten so spoiled with instant returns that holding a position for more than a few days and not seeing it run has made some traders I know get very anxious. It's not as simple as the position isn't moving, but more the issue of opportunity costs. Seeing so many stocks move by leaps and bounds on a daily basis can make a trader feel stupid for missing out on those other opportunities. It's a bit of FOMO (fear of missing out) meets the grass is greener syndrome.
The biggest issue is you may find yourself ditching a position right before it's ready to run.
That happened with Net Element (NETE) last week. After the stock couldn't find a bid for seven straight weeks, it rocketed higher last Thursday almost tripling the prior day's close. Every post Aug. 5th buyer had the opportunity to exit with a profit. Every post Aug. 6th buyer had the chance to exit with a big profit. And every buyer of the past month could've doubled his money. Now, I'll admit you would've needed to time your exit pretty well; however, for the patient traders, it shouldn't have been difficult to at least exit with some green.
While I'm not sure we repeat that push any time soon, it's worth noting NETE is now in the crosshairs of low float traders. It's there along with SPI Energy (SPI) , so it wouldn't shock me to see another run before the merger with Mullen (MLLGF) happens and the shares outstanding expands into the 50 million to 75 million share range with a dramatically larger float. I did exit the stock last week on the push, but I'm nibbling here sub $7, anticipating we'll see one more squeeze attempt pushing the stock back into the $8.50 to $9 level, but I don't expect another visit to the teens before the merger is complete.
Perceptron (PRCP) is today's reminder that patience can still pay in this market. Back in July, I recommended the stock along with a ratio call spread. In August, I repeated the same strategy. Following both landed a trader into a position with an average cost around $4.86 (call expired worthless both times). In August, I projected a target of $6, which wouldn't be bad for a cost basis under $5. Well, this morning we learned the company will be purchased for $7 per share in cash by Atlas Copco. I don't see a need to still around in this one. Take the big win and look for new opportunities as the remaining upside is limited.
The trade required traders to sit in a position for two to three months, but netted out a 40% return this morning. I'm guessing the three month time felt like an eternity and lots of missed opportunities, but as we've seen in this environment, many names are nothing at all, then all at once. That was the case for both NETE and PRCP. It reminds us that buy-and-hold can work. The thesis around PRCP was it was simply too cheap for the market exposure it held. Atlas Copco affirmed that thesis. The thesis for NETE has been the potential of momentum traders in a momentum sector. That thesis was affirmed last week. They simply took time to occur.
Remember to revisit your trade or investment thesis before casting a name aside. If nothing has changed, then maybe get another opportunity before potentially tossing away a future winner because of impatience.