ASX Small Cap Growth Stocks: (Taking profits - do I sell ASX Small Cap Stock Panoramic Resources (PAN)?)

Caroline Mark
ASX Small Caps really can provide awesome share price growth in a very short space of time. In less than 7 weeks after buying 3,000 ASX shares in the small cap stock Panoramic Resources (PAN), they have gone up 40%!
I bought 3,000 PAN ASX shares for 30.9c and now the ASX Shares are trading at 43.5c. So I’ve made $378 on my $927 investment. Well done me!

Small Cap Growth Stocks: Why has the ASX Small Cap gone up 40%?

As our analyst team wrote in our Small Cap Australian Stock Report this week:
“Stock in the ASX small cap nickel miner and one of Under the Radar’s best stocks to buy spiked almost 30% after the much bigger ASX listed Stock Independence Group (IGO) fired off what could be called an opportunistic and hostile bid worth $322m or around 49 cents a share, based on IGO’s price of $6.40.
IGO is offering small cap Panoramic shareholders one of its shares for every 13 Panoramic shares held via an off-market bid to be completed by a scheme of arrangement, which requires shareholder approval. Panoramic’s board has not, so far at least, engaged with IGO and recommends that its shareholders take no action. The share price of Panoramic subsequent to the bid on Monday 4 November has remained at a steady 10-11% discount to the IGO offer, indicating that the market does not think there will be a competing bid, and possibly that the deal may not proceed.”
Our ASX Share analysts are advising that you “take profits” or sell half your ASX Shares in PAN and then let your profits run. I bought less than $1,000 worth of PAN shares (not dissimilar to buying 50c of lollies – you always wished you’d bought more) and if I take all my money out it only leaves $378 which is really too small a parcel. Do I sell half my shares or 1,500 shares? Do I sell the lot and take my profits? Do I not do anything?
Remember I bought this ASX small cap stock knowing it was risky but I liked that it was producing (it wasn’t just in the start up phase) and obviously the bigger corporates like it too! This takeover offer at 49c tells me that I was right to buy it and it's a strong small cap stock.

TAX and Taking profits.

Now the tax man will be happy I’ve made money too on my ASX shares… If I hold any stock for 12 months I only get charged 50% Capital Gains but if I hold it for under 12 months I get charged Capital Gains tax at my top marginal rate for 100% of my profits). In dollars I’ve only made $378. I also have to pay my online broker $10 or $11 to make the trade. (PLEASE seek tax advice from a professional. I'm talking about my own personal experience and nothing more. I am not qualified to give any reader advice. I'm simply talking about my reasons why I'm making or not taking decisions).

What profit will I actually take home when I sell my ASX Shares?

So when I trade and it's now over $1,000 in value so I'll be charged $20 when I sell. My $378 will become $368. Tax if I'm charged at the top marginal rate of 48.5%  is $183, which leaves me with $185 in profit.. The risk is that the stock flunks and I lose not only the gain but the capital I put in. That scenario would make me sad. But of course there is the risk that the ASX small cap is great and keeps going up. The takeover offer gives me confidence that the small cap is a well run business.

I’m learning that decisions are hard. Even the good ones are! Do I not think about it too much, take Under the Radar’s advice partially, not sell half and sell the lot?  I’ve then turned $927 into $1,112 (after CGT).  But then I will make another trade – that’s another $20, So then it’s really $100 I’m ahead.
I bought this company because I liked that it is a current producer, that nickel is essential for batteries used in electric vehicles and that it’s doing well. Will it go up from here? Maybe. Will it go down from here? Very possibly. Will the share price move, definitely! But which way is anyone’s guess. But my guess is that I don’t think it’s worth me selling right now. I might lose my profit if this takeover doesn’t go ahead, but if it does the offer is at 49c (current price is 43c) but I think it’s a solid company that I bought at 30c. I’m staying in. If I owned more I’d definitely take some profits but I don’t think it’s worth it at this point because I bought such a small holding.

What lesson in ASX Share investing am I learning?

I was asked what I’d learned a week or so ago and I didn’t know what to say, as so far my portfolio of five ASX Shares is doing really well. They are all in the black, and my portfolio is worth $760 (or 7.8%) more than when I bought the shares less than 2 months ago. I’m really pleased that I haven’t frittered the money away and also that so far the ASX Shares that I’ve bought are all up. I  am really surprised the share price on the two blue chip shares that I’ve bought Alumina (AWC) and NAB (NAB) move around as much as they do.
But after the 40% rise in PAN, I think my lesson is think about how big a holding you need in a stock for it to be worthwhile. So even though it’s risen 40% which is a great growth small cap story, I really needed a bigger holding to make the profits worth while.
I hope my next Share Investing lesson isn’t ‘Take Profits when they are there, no matter how small in actual dollars it is! A profit is a profit, and paying tax at least means that you have made some money!
Right now, I’m holding onto my ASX small cap PAN shares.

About the Author

Caroline Mark

Caroline Mark is the Founder and Publisher at Under the Radar Report, which provides independent ASX share research to help build investor’s share portfolio. Under the Radar Report is licensed to give general share financial advice only (ASFL: 409518). The author is not licensed to give personal financial advice and this commentary is for general information only.

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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