Nvidia (NASDAQ: NVDA) is one of my favourite stocks. However, when the share price spiked up to $689 earlier this week, I hit the ‘sell’ button and banked some profits.
Here, I’ll explain why I sold. I’ll also explain my strategy with this stock now.
Why I offloaded the shares
There are several reasons I sold Nvidia at $689.
First, the stock had had an incredible run. Year to date, it was up 39%. That’s after a gain of 239% last year. A near-40% gain in a little over a month seemed a bit excessive to me.
Second, the share price had ‘gone exponential’ (i.e. straight up). That’s always dangerous. In my experience, when a stock goes up like this, it often comes crashing back down.
Third, I wanted to manage my risk. After the recent share price gain, Nvidia was a very large part of my portfolio. I just wanted to ‘right-size’ my position and make sure I wasn’t overexposed to the company. After all, this is a very volatile stock that can fall 30% or more in the blink of an eye.
Finally, I was sitting on a big profit. I was buying this stock back in 2022 near $190. So, at $689 I was up around 260%. I didn’t want to be too greedy.
I’ll point out that I only sold a small part of my position here. So, I still have a decent amount invested in the technology company. Even after my sale, it’s still my sixth-largest individual stock holding overall. So, I’m well positioned to benefit from any further gains.
My strategy
As for my strategy with Nvidia going forward, I plan to be in this stock for the very long term. I am talking 15 years or more.
I continue to believe that Nvidia has enormous potential in today’s digital world. It’s literally at the heart of the artificial intelligence (AI) revolution. And I wouldn’t be surprised if one day, it was bigger than Apple and Microsoft.
However, I plan to manage my position carefully.
If the share price continues to climb rapidly, which it may (Goldman Sachs just raised its price target for Nvidia to $800 on the back of its AI prospects), I might take a bit more profit off the table just to manage my risk.
Meanwhile, if the share price comes down by a significant percentage, I will most likely buy more shares for my portfolio. I would be interested in buying more stock around the $400 to $500 level. That price would give me more of a margin of safety.
Of course, it’s hard to know where the stock will go in the short term.
Yet I feel that after selling some shares, I’m in a good position. I’ve banked some gains and if the stock keeps rising, I can continue to profit.
The post I sold Nvidia stock when it hit $689. Here’s why appeared first on The Motley Fool UK.
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Edward Sheldon has positions in Apple, Microsoft, and Nvidia. The Motley Fool UK has recommended Apple, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
