This week’s rare Wall Street downgrade of Apple (AAPL) is the perfect example of why we don’t try to time the stock market. In a note to clients late Tuesday, KeyBanc lowered its rating on shares of the tech giant to hold from buy. If sold some Apple at the open on Wednesday at $171 on fears of a sell-off, we would have been sorry. Not only did Apple close higher on Wednesday, it added to those gains on Thursday and Friday. We would have missed out on a 3.8% gain over three trading days. Trying to sell a stock higher with the intention of buying it back lower is a difficult game. You may get lucky every once in a while. But for most investors, the potential reward is not worth the risk. Just because you think a stock is going lower in the near term doesn’t mean you should necessarily take action. After all, how many times have we seen a stock look expensive on estimates only to be proven far less expensive once the actual results come in — Nvidia (NVDA) anyone? Back in May, we wrote about how the chip stock surged 25% but got cheaper on a valuation basis. To be sure, we do trade around core positions for many reasons. We book profits after big runs, right-size positions that get too large, and trim to raise cash. We also sell when the outlook for a stock has changed, calling into question our investment thesis. However, it’s not our style to trim or trade out of a name purely on the view that we can buy the shares back a few percentage points lower. To better illustrate this thinking, we ran a few scenarios around a 1,000-share position in Apple with a hypothetical sale price of $171 per share and a $161 repurchase price. We used our real $205 per share Club price target on Apple. The “Ride it Out” scenario would yield a paper profit of $34,000 on a move from $171 in Apple shares to $205 based on ownership of 1,000 total shares. This is our “own it, don’t trade it” strategy. The “Sell and Never Get Back In” scenario assumes a 100-share sale at $171 and no…
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