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I Lost My Conviction in UBER
Presented by The Savings Captain
Recently I sold and liquidated my entire position in UBER. Selling a stock has become a rare event for me. It was the first time I had sold a stock in 2,558 days. Selling felt so unnatural. For seven years I have only bought or added to my ETF’s and individual stocks. I almost needed to watch a tutorial on how to sell a stock.
So why did I sell UBER?
I lost my conviction. You see when I buy a stock a key expectation is that I buy and hold FOREVER. Does that mean I buy and hoard… burying my head to market factors? Absolutely not.
My first purchase of UBER was before the pandemic. I saw UBER as a disruptor with their rideshare business, and they were. Additionally I liked the exposure to their other businesses: Delivery and Freight. I patiently held and added to my position during the pandemic, lowering my average cost to $36.11. In 2022 I remained confident on UBERs strive to become profitable, and they finally did. At last my patience was rewarded and my shares more than doubled. Is that why I sold, NO. I sold because I lost my conviction. I exited the stock at $72.42.
Here is why I lost my conviction. The landscape of rideshare is changing fast. For example, Waymo which Alphabet recently backed with $5billion provides 50,000 weekly autonomous rides in just three geographies. I always viewed UBER as the disruptor and now they are risk of being disrupted. Who knows, the future may prove me wrong, but the sure 100% profit felt better than holding through a loss of conviction.
Do you ever feel the same? You buy and hold a stock and not sure if your original buy thesis still holds? Do you find yourself more closely monitoring the stock, trying to talk yourself into holding while doubting mounting evidence that doesn’t support your thesis? If so, you are not alone. This is a common path all longterm investors face.
Here are some criteria I use to monitor my conviction
Reasons to Sell a Stock
Change in Fundamentals: If the underlying business fundamentals of the company have deteriorated, such as declining revenues, profits, or market share, it may be a sign to sell. This is because the original reasons for investing in the stock no longer hold true.
Shift in Market Conditions: Changes in the broader market or industry conditions can impact the performance of a stock. For instance, regulatory changes, economic downturns, or new competition can alter the investment landscape.
Personal Financial Goals: Your financial goals and risk tolerance may change over time. If a stock no longer aligns with your investment strategy or risk profile, it might be prudent to sell.
Risks of Holding Without Conviction
Emotional Attachment: Holding a stock due to emotional attachment rather than rational assessment can lead to poor investment decisions. It’s important to distinguish between conviction and emotional bias.
Opportunity Cost: By holding onto a stock without conviction, you may miss out on other investment opportunities that could offer better returns.
Increased Risk: Without strong conviction, you may be more susceptible to market volatility and the potential for further losses.
Practical Steps to Take
Regular Portfolio Review: Regularly review your portfolio to ensure that each stock still aligns with your investment objectives and risk tolerance. This can help you make timely decisions about selling underperforming stocks.
Set Sell Rules: Establish clear criteria for when to sell a stock, such as specific price targets or changes in business fundamentals. This can help you avoid holding onto a stock for too long due to indecision or emotional attachment.