3 stocks to TAKE PROFITS on + 4 investing rules

 

Every day is notable for the toing and froing in the Middle East, but three market events outside of this stood out for me:

1. the Judo Bank rout with $JDO falling 40% in one day on bad debts associated with only 3 loans;

2. Bitcoin falling below US$60k to be at its lowest level for almost 2 years; and

3. profit taking in the giant US based semi-conductors including Nvidia, AMD, Broadcom, Marvell, Micron.

What does this all mean? Simply that investors are nervous about stocks whose high valuations are based on the rosiest of rosy futures.

Here are 4 investment principles you can hold on to:

1. Diversify
2. Buy Cheap
3. Bank Dividends
4. Take Profits

Actions for investors this week

This week if you do nothing else, have a look at your portfolio and think about taking some risk off the table i.e. take profits. Factors to think about:

1. Expensive valuation
2. Weighting in your portfolio has increased
3. You spend too much time thinking out them
4. Taking your costs out and letting your profits run

 

 3 stocks to take profits on

Notice they are at the big end of town, because it’s these stocks that get super charged buying from passive funds, or index linked ETFs.

1. CBA (or any big bank)

• We’ve taken profits on CBA and the other big banks recently.
• These banks have not had any bad news for a long time and are still being priced like bonds.
• They are a great place to raise some cash and keep your exposure.
• Last month’s 3^rd quarter result was below expectations and was an effective downgrade.
• Downgrades are like London Buses – they occur in 3s.
• Watch out!
  

  2. DroneShield $DRO

  

• The Drone Protection specialist has done a very good job, but a lot is baked in to expectations for this year alone.
• If you have been canny enough to buy at lower levels and have doubled your money, you cannot go wrong banking profits.
• Who knows what the IP in this space will look like in even one year’s time?

 

 

3. Rio Tinto $RIO

• Everything is going right for the mining giant, which is why we think it’s time to take some of it to the bank (don’t buy banks tough).
• The stock is up 70% or so in the past 12 months, being boosted by strong copper and iron ore prices; while iron ore prices have been resilient.
• Remember, just to maintain production at current levels, RIO has to spend around US$11bn a year. That is every year and is equivalent to its after tax profit, when commodity prices are doing well.

We continue to love quality Small Caps for growth and dividends.