No dog in the CAT fight (pun definitely intended), but one thing I would add is these conversations tend to come through a lens where the assumption that any money taken off the table sits in cash and the assessment of good/bad decision is whether the original stock in question continues to go up.

Tax considerations aside, always remember any profits you take can be reinvested into something you think has a better risk/reward at the time!

To add to the charming neurosis on display…

It’s just a great test of conviction isn’t it.

If you were genuinely that high conviction, would you really sell ?

I combine that basic idea with a regret-minimisation approach to come up with a composite decision making process.

What would I long-term regret more, hold and lose a little bit money if it drops, or sell and lose a life changing amount of money.

Honestly, I’m a dreamer, and I genuinely think a certain level of concentration(and luck) is required to cross the rubicon into the land of significant wealth.

i don’t think I’ll ever be able to get where I want to be if I don’t have one big winner come in in my life. I don’t have enough runway.

but that’s me, we’re all different.

good luck everyone

Looks like the ASX 200 index inclusion has given Forager the opportunity to exit their remaining holdings so they are completely out.

https://www.livewiremarkets.com/wires/moving-on-from-catapult

Hard to fault their rationale @OxyBBear, and as i've said recently i'll be selling down a little too for the same reason. Not totally, and not even significantly, but the current price really does assume a very rosy outlook.

The announcement was released well after the market had already closed today @jcmleng however there might have been a leak. It appears that some market participants may have been aware the announcement was coming.

Either they knew or they were guessing.

After today's scheme vote by GOR shareholders (99% in favour), it was just a matter of guessing who was in the box seat to replace GOR in the ASX200, and CAT should certainly have been considered a strong contender after their SP rise this year.

If you are extremely bullish about CAT long term @jcmleng why sell at all? We all know that we need to stomach some volitility in small cap stocks. But volitility doesn't always happen in the downward direction - sometimes stocks become overvalued and overshoot their intrinsic value. Maybe even significantly. If you sell everytime a stock is overvalued you end up creating tax events and reducing your long term returns. Is it likely the SP will be higher in 5 years than it is now? To me, if the growth thesis is intact, hold through the volitility and let compounding work its magic.

@Shapeshifter, the short answer is "proactive portfolio risk mitigation". Volatility does not come into the mix at all.

Pre-trimming and pre-yesterday's pop, CAT was about 12% of my portfolio of 18 companies + 2 ETF's. With the pop, I suspect it might have gone up to 13-14%. 

My "ideal" high conviction portfolio allocation is around 10%, 11% tops. 10% allocation is my trigger to consider "trimming the flowers". 

Post trimming, CAT is now 10.9% allocation, still significant, but not out of control. 

There were a few other drivers:

1. I have learnt the need to "trim the flowers" and lock in some profits from a tough AD8 lesson. I bought in at ~$5.50, saw it go to $21-$22, thought it would go one to become the next PME, did nothing, only to exit the position with a 13% loss.
2. While CAT is on an absolute high and with full on momentum behind it with the inclusion in the ASX300, then ASX200, it is now transitioning into a momentum stock, likely to be running way ahead of fundamentals, creating irrational expectations. While I am absolutely confident CAT will do well in 1HFY26, I am not so sure it can meet the now-increased market expectations. The probability of delivering sterling results which falls short of expectations has gone up. I do not want the portfolio to take a sharp hit from this.
3. I want to calmly raise cash to redeploy to my other holdings as prep for an eventual correction as I posted in the Corrections thread.

I have done similar trimming to NWL when it crossed 10% allocation - I have the same high conviction bullish view on NWL. Ditto for XRO, although XRO is more medium conviction for me now.

EOS is now hitting 12% allocation. It has all the challenges above. But there is a key difference - EOS has flagged that they expect another $100m deal by end CY2025/early CY2026, which given current out-of-control defence demand, drone-related drama's in Ukraine, feels more imminent than not. So, I won't be trimming just yet - will wait for that deal, then trim into any price movement.

Will be hanging on to CAT for a very long time as there is still a long way to go, but will also be trimming if the allocation gets outs of control again. A good problem to have but a problem nevertheless. And very, very hard to execute, despite there being solid reason why this is necessary!

Discl: Held IRL and in SM

@jcmleng limiting an allocation sizing will limit the impact that holding has on the overall portfolio performance. Using this as "proactive portfolio risk mitigation" limits the effect a stock draw down will have on the overall portolio however what you give up is the potential for life changing large multibaggers.

Having a 10% allocation limit essentially punishes your fastest growing stocks (if the share price of your stocks increase at the the rate the percentages stay the same). Selling a stock because it is growing the fastest seems backwards to me.

Let me illustrate my thinking with an example. Lets assume it's 2015 and you have a 10 stock portfolio. One of those stocks is Pro Medicus and you have 10,000 shares purchased at $3.18 (yes I know Claude late to the party!). This costs you $31,800 and represents 10% of your portfolio so total portolio value is $318,000. You decide to keep trimming all 10 stocks as they grow so none is bigger than 10%. Lets say you are a pretty good small cap investor and your portfolio CAGRs at 15% pa. Fast forward to 2025 and the portfolio total value is now about $1,286,000. Seems very good on first look but what have you given up on the way?? Now your 10% allocation of PME is worth $128,600. At todays price of $310 per share means you now have about 412 shares. That means you sold 9,588 shares along the way. Had you not sold any those 10,000 shares they would now be worth $3,100,000. That is life changing.

You may provide some insurance by capping allocations in your portfolio but it comes at the cost potential outsized gains.

@Shapeshifter and @jcmleng i am

enjoyinf the back and forth on CAT position sizing and share the dilemma (happy dilemma to have). Although on first blush j agree with you @Shapeshifter that ‘if you have high conviction why sell at all?’ When I force myself to consider the same my answer would be that everything has a price… to make the absurd argument, if you were offered a million dollars a share for CAT would you sell? And so it’s really just a matter of valuation when it comes down to it… perhaps at his core @jcmleng simply sees Catapult as overvalued right now? Feel free to correct that inference @jcmleng

@Shapeshifter, I totally get where you are coming from and I have tussled with myself on this exact topic for quite some time now.

The challenge is that I look at CAT not in isolation, but as one holding in a larger SMSF portfolio, the SMSF entering into pension phase in 4 years time, a portfolio that is probably overly growth aggressive with not a bone of defensiveness, the need to spread portfolio risk to other lower allocated holdings, among other things.

So all things considered, trimming feels the right thing to do for my portfolio right now. There is both positive and negative risk, in every action or inaction, in every direction and so, it is about finding a balance - only time will tell if the balance was right or wrong.

No idea what I will do next - will look at evidence as it unfolds and work out what to do along the way. My 10-11% allocation threshold is only a review trigger, not an automatic must-trim signal. But I have definitely slept better having locked in some profits. That may in turn increase my risk tolerance to let CAT run longer from hereon ...

@GazD , the truth is that I have no idea what CAT's valuation is, so this is not a valution-driven decision at all. I see a long runway ahead and I intend to hold CAT until evidence suggests it has turned south.

Thanks for your candour @jcmleng can only say were CAT a large holding in my smsf and I was approaching retirement I would likely take a more conservative view with its position sizing than I am…

FWIW @Shapeshifter and @jcmleng I believe $CAT is now well into overvalued territory, and I have sold 50% of my RL position that I’ve held for over a year. (Sold some SM too just to communicate what I’m doing.)

I’m now underweight what I’d like to hold but, based on historical volatility, I have high confidence I’ll be able to add again at a much lower price, even if I have to wait a year or longer,

I do this from time to time when my core holdings fly up way beyond my upper range and, as long as I am patient, I’ve nearly always been able to get back in. Sure, I might have to wait until some macro risk-off event, but the time will come. The important thing is to keep my valuation up to date, as the re-entry price will continue to evolve and so I make sure I don’t anchor on price but on value.

I know many don’t like doing this, but I have a clear valuation framework for these decisions.

Great thread, and Im wrestlimg with the same dilemma.

Catapult is well above my estimate of value too.. but it's growing strongly with a long runway ahead, and I've learned the hard way *cough* ProMedicus *cough* that over thinking these things can prove costly.

At the same time, it's not rational to let one experience/example make you discard prudent position sizing. There are FAR more examples of trimming overvalued, large holdings being the right move..

I will probably sell a few in real life and here on SM, but will keep it as a major holding.

Also, woo hoo! Go you good thing! A 10x in the last 3 years! And a 47% CAGR since I added here in SM in 2018. What a journey!

@Strawman indeed $PME is the spectre that will always haunt me. But I think $CAT is no $PME. (Famous last words.)

With regards to PME and other high priced stocks like WES and HUB all you need to remember is one name - George Costanza (and that famous last episode The Opposite).