When to Sell Your ASX Shares

Richard Hemming

You’ve got to invest in ASX shares to win

The ASX share market is highly volatile and as a result there are trading opportunities for small cap investors. If you want to be a successful small cap investor, you've got to be in it to win it.
One month is a long time in the COVID-19 world. Back when the ASX share market was dropping fast Under the Radar Report's advice to small cap investors was to buy quality ASX shares in small parcels and that has proven to be the right strategy.
In Under the Radar Report's own accounts we put varying amounts of money to work, between 20-50% of our funds employed. In some cases we got the timing right. I’m talking about stocks that include Kogan (KGN)Seven West Media (SWM) and Infomedia (IFM) and others.
In tomorrow’s Under the Radar stock report we are taking profits on some of those stocks where we were fortunate to get the timing right. 

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When small cap investors should engage in an ASX sell transaction 

For small cap investors, our take profits recommendations are on ASX shares that have climbed between 30% and 65% in the past month since our positive recommendations. Another that is up 15-20% over that period we have chosen to downgrade to hold. Basically, a rule of thumb for any small cap investor is that if your profit doesn’t exceed 20% we don’t think it’s worth engaging in a sell transaction.

Try getting an index linked ETF return in that ball park.

The universe of accidental tourists

A number of the small caps that we are taking profits on are what we call “accidental tourists”. This is indicative of the quality that has emerged in the small cap universe following the big sell offs. Under the Radar Report defines this universe as ASX listed companies with market capitalisations of less than $600m. What we’re looking for is prime cut sirloin at chuck (out) steak prices.

Continued market volatility

As evidenced from the market ructions caused by the collapsing oil price, we will be seeing continued volatility for a while (six plus months) as waves of real information hit the market and we get what we call sticker shock – where the realities of the economy hit stock market expectations.

Under the Radar Report's Advice: Taking profits when opportunities arise  

As Under the Radar Report said in our trading update earlier this week: low interest rates make equities in general more attractive but that is only if those companies are producing profits that you believe will keep rising into the future. No single company can guarantee that, which is why there is an equity risk premium. But if equity prices inflate in a hunt for better returns, the prospect of better returns disappears quite quickly. As a small cap investor, it’s always a good idea to consider taking some risk off the table by taking profits when opportunities arise.

About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

Under the Radar Report is licensed to give general financial advice only (ASFL: 409518). The author does not own shares in any of the stocks mentioned.

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