4 stocks are taking charge in 2023

| June 02, 2023

Remember the debt ceiling scare? We’ve gone from a panic in some circles that a government standoff will cause an economic collapse to “never mind—everything’s fine.” Meanwhile, after a deal was reached, stocks continued their upward march for the year.

The S&P 500 is up 16% for the year to date through mid-June, a welcome sign after a miserable 2022. Most of that work has come since mid-March. A lot of boats have been lifted by this rising tide, but Meta Platforms (aka Facebook) and NVIDIA have really soared this year. Meta has more than doubled, while NVIDIA’s up almost 200%. Amazon’s up 48%, and Alphabet’s stock price has grown by 40%.

I should note that if you believe that earnings growth fuels stock prices, these four stocks are good proof points. Analysts expect these companies to be the biggest contributors to earnings growth among S&P 500 companies in the fourth quarter of this year, Factset reports. “If these four companies were excluded, the estimated earnings growth rate for the S&P 500 for Q4 2023 would fall to 4.2% from 8.2%,” Factset says.

I doubt anybody picked up all four of these shares on the first trading day of the year, but certainly these are well-known, widely held names. So some investors surely have benefited from their soaring prices.

When stock prices go up by so much, investors face a good problem to have. Should they sell and take their gains or continue holding? Selling successful stocks requires strategy and discipline.

One philosophy is to “let your winners run.” In other words, let the shares run their course before selling so that you continue to enjoy their upside. Also, if all you do is sell your winners, your portfolio might end being a lot of dogs.

On the other hand, the risk is that you’ll hold on to the shares too long and lose much of the gains because you failed to act. Letting your winners run it isn’t a bad approach, but it does require a lot of diligence to make sure the company’s sales and earnings performance continues to merit the stock’s price.

I tend to view this question from the perspective of total portfolio management. Depending on how much you paid for the stock and how much it originally represented in your holdings, sometimes a stock can increase so much it begins to dominate your portfolio to an unhealthy degree.

A prudent approach is to trim successful holdings to a normal percentage of your portfolio. If you have 15 stocks, that would mean an average holding of about 8%. You could decide to hold more or less than that—there’s no need for such mathematical precision. But you’ll benefit from the stock’s growth while controlling the risk that one stock’s downfall capsizes your portfolio.

The stock market is always unpredictable. If you feel like you’ve missed out on these stocks, you aren’t alone. Don’t turn one mistake into two by chasing performance. Make sure you’re paying a reasonable price for a stock’s growth potential and maybe you’ll catch the next rising star.

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_060923.pdf



Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com.   Read more of his insights at https://finance.heraldtribune.com/category/ask-guido/. Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC.  Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through  an Avantax affiliated insurance agency.  6260 Lake Osprey Dr. Lakewood Ranch, FL 34240.  The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth Management® or its subsidiaries.  Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.  Investments are subject to market risks including the potential loss of principal invested.