I took profit yesterday in Abbott Lab (ABT) after a great run. You may wonder or even criticize my decision to sell a great company for a short-term profit and I don't blame you. I still think more upside are to be had in this company. But the fact remain, I've net 16% profit in little over two months excluding one dividend payment. With 33% of the portfolio (I do not diversify), I cannot afford to have the gain slip away or wait for a bigger gain in longer time. After all, my investment goal isn't time oriented but profit oriented.
A close examination of the fundamental and I can easily see Abbott rise to $55, roughly 5% more from what it currently trades. What if the stock has trouble and drop to $47 (support level) then I will be risking 10% downside movement. You see, risk-reward has changed. I am now risking losing 10% profit for 5% upside. The chart below shows my transaction.
Going forward, I would look to buy Abbott back around $47.
Please note, I no longer buy and sell in increment. The fee in such transaction cuts into my gain and magnify my loss. I rather sell all and buy it again when I feel it is a better opportunity.
Additional articles on Abbott.
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