Nvidia (NASDAQ: NVDA) is one of my favourite stocks. However, when the share price spiked up to $689 earlier this week, I hit the ‘sell’ button and banked some profits.
Here, I’ll explain why I sold. I’ll also explain my strategy with this stock now.
Why I offloaded the shares
There are several reasons I sold Nvidia at $689.
First, the stock had had an incredible run. Year to date, it was up 39%. That’s after a gain of 239% last year. A near-40% gain in a little over a month seemed a bit excessive to me.
Second, the share price had ‘gone exponential’ (i.e. straight up). That’s always dangerous. In my experience, when a stock goes up like this, it often comes crashing back down.
Third, I wanted to manage my risk. After the recent share price gain, Nvidia was a very large part of my portfolio. I just wanted to ‘right-size’ my position and make sure I wasn’t overexposed to the company. After all, this is a very volatile stock that can fall 30% or more in the blink of an eye.
Finally, I was sitting on a big profit. I was buying this stock back in 2022 near $190. So, at $689 I was up around 260%. I didn’t want to be too greedy.
I’ll point out that I only sold a small part of my position here. So, I still have a decent amount invested in the technology company. Even after my sale, it’s still my sixth-largest individual stock holding overall. So, I’m well positioned to benefit from any further gains.
My strategy
As for my strategy with Nvidia going forward, I plan to be in this stock for the very long term. I am talking 15 years or more.
I continue to believe that Nvidia has enormous potential in today’s digital world. It’s literally at the heart of the artificial intelligence (AI) revolution. And I wouldn’t be surprised if one day, it was bigger than Apple and Microsoft.
However, I plan to manage my position carefully.
If the share price continues to climb rapidly, which it may (Goldman Sachs just raised its price target for Nvidia to $800 on the back of its AI prospects), I might take a bit more profit off the table just to manage my risk.
Meanwhile, if the share price comes down by a significant percentage, I will most likely buy more shares for my portfolio. I would be interested in buying more stock around the $400 to $500 level. That price would give me more of a margin of safety.
Of course, it’s hard to know where the stock will go in the short term.
Yet I feel that after selling some shares, I’m in a good position. I’ve banked some gains and if the stock keeps rising, I can continue to profit.
