Knowing what to buy is important, but knowing when to sell is critical if money managers want their gains to stick, according to financial columnist Randy Reynolds.
That's why Reynolds likes the decision-making of Gerry Coleman, portfolio manager on CI Investments' Harbour Growth fund and Income Harbour Foreign Equity fund.
Coleman's firm is in Canada, but his approach crosses all borders.
"Coleman is by no means the only manager whose criteria for stock selection are reasonable price, good business prospects and good management, but he is one of the most consistent in his peer group," Reynolds wrote on the topic of "round trips," or those instances where a portfolio manager rides a stock to its pinnacle, but stays too long and rides it back down again.
And the secret is the ability to resist the urge cling to a shooting stock, and learning to sell for a profit, even if the stock may have the potential to still go higher. After all, shooting stars always fall, and with them, investors' gains.
Reynolds points to Coleman's management of oil and gas stocks, in which the Harbour Foreign Equity Fund is heavily invested. After making some gains, Coleman sold some stock in Calgary-based Suncor, an integrated energy and resource company, because although the fundamentals were still good, he said the price had climbed too high, according to Reynolds.
In 1999, Coleman's fund gained 14%, compared to 20% for Canadian equity funds overall. But in 2000, when the peer group gained 7%, Coleman's fund gained 18%. Then, while his peers watched their funds fall about 5% in 2001 and then another 12% in 2002, Coleman's CI Harbour fund gained 7% in 2001 and lost only 1% in 2002. Ultimately, between 1999 and 2002, Coleman's funds gained 42% overall.
"That's what being conservative and taking profits when they're available can do," Reynolds writes.