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The Lake Resources N.L. (ASX: LKE) share price is deep in the red alongside plenty of its S&P/ASX 200 Index (ASX: XJO) peers.

The index is suffering a sell-off event on Monday with mining stocks among the worst hit.

Right now, the Lake Resources share price is 92.5 cents, 6.57% lower than its previous close.

For comparison, the ASX 200 has plummeted 1.4% at the time of writing.

What’s going so wrong for the ASX 200 lithium hopeful? Let’s take a look.

What’s weighing on the Lake Resources share price?

Shares in Lake Resources are plummeting on Monday amid a terrible session for ASX 200 mining stocks.

The S&P/ASX 200 Materials Index (ASX: XMJ) is currently the index’s second worst performing sector, behind only the S&P/ASX 200 Energy Index (ASX: XEJ).

The energy sector has dumped 6% at the time of writing, likely driven lower by falling oil prices.

Meanwhile, the materials sector is falling 4.6%. Its downturn appears to have come on the back of growing recession fears. And Lake Resources’ stock is among its worst performers.

The stock has now dumped all of the 6% gain it clocked up last week after updating the market on its Kachi Lithium Project.  

On top of that, it has been underperforming the broader market over the course of this year so far.

The Lake Resources share price is currently 15.1% lower than it was at the start of 2022. The ASX 200, meanwhile, has dumped 14.5% year to date.

Longer-term investors can still boast a strong gain, though. The stock has lifted 54% over the last 12 months while the index has fallen 12%.

The post Why is the Lake Resources share price sinking 7% on Monday? appeared first on The Motley Fool Australia.

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More reading

• Here’s which ASX lithium shares investors have been loading up on this month
• Why has the Lake Resources share price been so volatile lately?
• Which ASX lithium shares are performing best in 2022?
• Here are the top 10 ASX 200 shares today
• Guess how many companies in the ASX 300 actually make no money

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Between rising interest rates, a potential recession on the horizon, and a bear market in full swing, it’s a fraught time to be an investor. And that’s especially true for those who prefer to buy growth stocks, which have been hit significantly harder than the market as a whole. The market-tracking SPDR S&P 500 ETF Trust (NYSEMKT: SPY) is down by more than 11% over the past 12 months, while the large-cap SPDR Portfolio S&P 500 Growth ETF (NYSEMKT: SPYG) is off by around 18% in the same period. 

So should investors shy away from expansion-phase companies for a while, seeing as how conditions appear to be poor for them in the present and likely tenuous in the near future? The answer depends on your goals for investing, the riskiness of the stock you’re thinking of, and — last but not least — your own mental fortitude, so let’s break these issues down individually. 

Determine your time horizon

Before you can answer for yourself whether it’s appropriate to be buying growth stocks right now, you’ll need to figure out how long you want to hold your shares. Another way to frame that question is to ask when and why you’ll need to take out the money from your investment. 

If you think you might need your funds back into cash within a couple of years, you probably shouldn’t be buying any type of stock, as it could take longer than that to reach the price level where you bought the shares. In contrast, if you’re investing for the long-term (and you should be), it could still be a good time to buy, but there’s more to the story. 

By definition, growth stocks are backed by growth-phase companies that often aren’t yet focused on profitability and that are too immature to consider giving capital back to shareholders. In practice, that means if you decide to sit on the sidelines instead of buying shares, you could be missing out on a significant run-up as businesses expand quickly over time. It’s also possible that you could be sagely dodging a catastrophic collapse in share prices caused by any of the many headwinds in force right now. 

It isn’t possible to determine which of those two outcomes are going to occur in advance, but you can improve your chances by being picky about which growth stocks you invest in and how much of your capital you choose to commit to them. And if you can do that, now’s a decent time to be buying. 

Allocate your risk budget conservatively 

Being careful with your investments amid the ongoing economic uncertainty means favoring growth companies that are likely to weather the turbulence with grace and avoiding those that won’t. 

For example, Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) develops medicines for rare diseases like cystic fibrosis. It’ll keep performing clinical trials and commercializing drugs regardless of a recession, and its patients will need to keep buying its therapies (or getting their insurers to pay) no matter what. Plus, rising interest rates don’t threaten it much at all, because it’s profitable, expanding its top line consistently, and it also generates enough free cash flow to avoid needing to habitually borrow money. And it’s currently shrugging off the bear market without breaking a sweat, with its shares rising by nearly 28% so far this year in comparison to the market’s fall of 19%.

So, Vertex looks to be a growth stock that’s ripe for buying, even now. But with other companies, the reverse may be true.

Consider the multinational cannabis business Tilray Brands (NASDAQ: TLRY). It isn’t profitable, and this year its quarterly gross margin is contracting under pressure. Its quarterly revenue growth is flat over the past year, and there are problems with oversupply in the cannabis market that are likely to force it to write down its inventory at a loss (again) or lower its selling prices. Therefore, with its performance questionable even before the headwinds of 2022, it probably isn’t a good time to buy, unless you can tolerate quite a bit of additional risk beyond what’s normally associated with the stock.

Can you invest and still get a good night’s sleep?

Per the previous section, investing in the most resilient growth stocks is still a good decision in today’s environment, even though investing in the more speculative plays could be more risky than usual. But perhaps the biggest issue is whether you can accept the risks of the growth companies you decide are worth investing in, even when the going gets tough. 

If buying shares of a risky business right now is going to have you checking on your portfolio multiple times per day, it probably isn’t worthwhile. You only get the benefit of a company’s gain in value over time if you are actually able to hold its shares without selling them out of fear or stress about their future worth. 

If you can tolerate your positions being underwater for a few months or years, it’s a perfectly good time to buy riskier growth stocks like Tilray, assuming you’re comfortable with the chance of actually losing your money — but if that thought terrifies you, it’s best to find growth investments like Vertex that are likely to have a bit more staying power regardless of the economy or the market.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is now the right time to be buying growth stocks? appeared first on The Motley Fool Australia.

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More reading

• Why is the Rio Tinto share price rolling 5% lower on Monday?
• What might Origin’s latest move mean for the future of ASX 200 energy shares?
• Why has the Macquarie share price been thrashed 10% in a fortnight?
• Why is the Core Lithium share price cratering 9% on Monday?
• How big will the CBA dividend be in 2023?

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Vertex Pharmaceuticals. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Rio Tinto Limited (ASX: RIO) share price is having a day to forget on Monday.

In early afternoon trade, the mining giant’s shares are down a disappointing 5.5% to $88.14.

Why is the Rio Tinto share price falling?

Investors have been selling Rio Tinto and other mining shares on Monday following a broad market selloff driven by concerns that a rising rates could trigger a global recession.

If one were to occur, it could lessen demand for commodities and weigh on prices.

US investors certainly appear to believe that a recession is imminent. They sold down the Rio Tinto share price by 5.5% on Wall Street on Friday night. Which, coincidentally, is the same margin by which the company’s locally listed shares have fallen today.

It isn’t just the Rio Tinto share price that is under pressure. BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and South32 Ltd (ASX: S32) shares are all falling heavily today.

This has led to the S&P/ASX 200 Materials index tumbling a sizeable 4.5% today.

Should you buy the dip?

Goldman Sachs may see the weakness in the Rio Tinto share price as a buying opportunity.

Its analysts currently have a buy rating and $121.50 price target on the company’s shares. This implies potential upside of almost 38% for investors over the next 12 months.

In addition, the broker is forecasting very generous fully franked dividend yields of 9%+ through to FY 2025.

This could mean big returns for investors if Goldman Sachs is on the money with its recommendation.

The post Why is the Rio Tinto share price rolling 5% lower on Monday? appeared first on The Motley Fool Australia.

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More reading

• Why is the Rio Tinto share price sparkling in a sea of red today?
• Own Rio Tinto shares? It’s time to dig into your dividends
• $18 billion of ASX dividends are being paid out this week. Here’s the lowdown
• Why China’s slowdown isn’t as bad as it looks for ASX 200 mining shares
• Down 19% since June, where to next for the Rio Tinto share price?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The decision of Origin Energy Ltd (ASX: ORG) to withdraw from the Beetaloo Basin sparked shockwaves last week.

The energy giant’s move comes after it announced it will sell its exploration interests in the region for $60 million.

Tamboran Resources Ltd (ASX: TBN), along with its largest shareholder Bryan Sheffield, will take over Origin’s 77.5% interest in three permits in the Northern Territory region. Tamboran will also receive a 5.5% royalty based on wellhead revenues from the permits.

Why Origin decided to abruptly make the decision is not fully understood. However, the company made it clear the capital-intensive nature of the project means it is “better placed prioritising capital towards other opportunities that are aligned to [its] refreshed strategy”.

Origin expects to make a $70-$90 million loss on the deal.

What’s the decision mean for ASX 200 energy shares?

Whilst it’s difficult to draw a direct correlation between Origin’s decision and the share prices of other ASX 200 energy players, it wasn’t a pretty time for the sector last week.

Many of the dominant names incurred a period of downside. However, it’s worth noting here the price of natural gas has also taken a nosedive in the past two weeks.

US Natural gas futures trade 24% down at US$6.89/MMBtu from their previous high on 14 September, whereas both UK and European gas contracts are down in similar fashion.

Coal has also been trading sideways for the past two weeks as governments around the world look to hedge their exposure to soaring energy prices.

Despite last week’s announcement, Origin will keep a direct interest in the Beetaloo Basin, with the company still set to receive up to 36.5 petajoules of natural gas per annum from the site if it’s successfully developed.

Origin’s exit is unlikely to have a large impact on well-established energy giants such as AGL Ltd (ASX: AGL), Santos Ltd (ASX: STO), and Woodside Energy Group Ltd (ASX: WDS).

Each of these giants has its own respective capital investments at various sites around the world and is not limited to just one or two projects.

In addition, they all have diversified exposure to the industry.

Nevertheless, it will be a matter of time to see if there is any major fallout from Origin’s decision to pursue greener opportunities.

Origin shares remain up more than 18% over the past 12 months of trade. The returns for all shares mentioned are seen on the chart below.

The post What might Origin’s latest move mean for the future of ASX 200 energy shares? appeared first on The Motley Fool Australia.

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More reading

• What’s next for AGL shares following the company’s latest shake-up?
• AGL share price dips following changing of the guard
• AGL share price slides amid shareholder revolt
• What’s going on with the AGL share price today?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Macquarie Group Ltd (ASX: MQG) share price is down 10.6% in two weeks. Last week the bank lost a proposed takeover bid for Suez Recycling and Recovery UK.

A consortium of companies has pushed in on Macquarie’s acquisition of Suez, as reported by the Australian Financial Review.

Last Wednesday night, the consortium was said to exercise its right of refusal, which put Macquarie out of the picture.

The article reports that members of the consortium include the companies Meridiam, Global Infrastructure Partners, Caisse des Depots Group, and CNP Assurances. My Fool colleague Bernd notes, this is the same group of companies that own Suez’s operations in France.

Before Macquarie’s deal fell apart, Britain’s market regulator had instructed French waste management giant Veolia, which owns Suez Recycling, to divest the business on antitrust concerns that were raised in May.

The divestment was deemed necessary as it could lead to anti-competitive practices, potentially leading to higher consumer prices.

A spokesperson for Macquarie made the following comments on the failed bid:

As previously announced, our proposed investment in Suez’s UK recycling and recovery operations was subject to the satisfaction of certain closing conditions, including a right of first refusal. We look forward to identifying other opportunities in the sector where we can support the transition to a more sustainable, circular economy.

Macquarie reportedly offered to buy the company for 2.5 billion euros (AU$3.7 billion).

While Macquarie’s acquisition of Suez has apparently fallen apart, the company could have other irons in the fire. In March, it was speculated that Macquarie could be eying up the wealth division of Westpac Banking Corp (ASX: WBC), which could be worth $1 billion.

Macquarie share price snapshot

The Macquarie share price is down 21% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 13% over the same period.

The company’s market capitalisation is $63.98 billion.

The post Why has the Macquarie share price been thrashed 10% in a fortnight? appeared first on The Motley Fool Australia.

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More reading

• This expert tips 25% upside for the Macquarie share price
• Analysts name 2 excellent blue chip ASX 200 shares to buy now
• Macquarie shares bear the brunt of bank sell-off amid inflation bomb
• Top ASX dividend shares to buy in September 2022
• I shouldn’t have sold this ASX share two years ago: fund

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price is plummeting amid a broader sell-off event in which S&P/ASX 200 Index (ASX: XJO) miners are being crushed.

Stock in the lithium favourite is down 8.7% at the time of writing, trading at $1.26.

Comparatively, the ASX 200 has tumbled 1.9% right now. At its intraday low, the index was trading just 0.4% higher than the 52-week low it set in June.

Let’s take a closer look at what’s going wrong for the soon-to-be lithium producer on Monday.

Core Lithium share price dives 8% amid ASX 200 sell-off

The Core Lithium share price is helping to drag the ASX 200 even deeper into the red today despite the company’s silence.

The stock is currently the S&P/ASX 200 Materials Index (ASX: XMJ)’s worst performing constituent.

In turn, the sector is tumbling 4.6% right now, leaving it outperforming only the S&P/ASX 200 Energy Index (ASX: XEJ). The energy sector is down a whopping 6% at the time of writing.

While a falling oil price appears to be weighing on the energy sector right now, fears of an impending recession are seemingly taking their toll on ASX 200 miners.

Today’s tumble also sees Core Lithium’s stock trading 10% lower than it was at the end of last month. Interestingly, that’s the last time the market heard price-sensitive news from the company.

Then, it announced the final date on which it was expected to complete its offtake negotiations with electric vehicle giant Tesla Inc (NASDAQ: TSLA) had been pushed back to next month.

Despite its recent suffering, however, the Core Lithium share price is still more than 100% higher than it was at the start of 2022. It has also gained over 200% since this time last year.

The post Why is the Core Lithium share price cratering 9% on Monday? appeared first on The Motley Fool Australia.

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More reading

• Here’s which ASX lithium shares investors have been loading up on this month
• Which ASX lithium shares are performing best in 2022?
• Why has the Core Lithium share price cratered 15% in a week?
• Guess how many companies in the ASX 300 actually make no money
• Is this prediction great news for ASX lithium shares?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Commonwealth Bank of Australia (ASX: CBA) share price has come under pressure with the rest of the market on Monday.

In morning trade, the banking giant’s shares are down 1% to $92.74. This means the CBA share price is now down approximately 6% since this time last month.

While this is disappointing for shareholders, it does make the bank’s shares more attractive for non-shareholders. Particularly given the generous dividend yields that its shares traditionally offer investors.

In light of this, let’s take a look to see what the market is expecting from the CBA dividend in 2023.

How big will the CBA dividend be in 2023?

As a reminder, the banking giant released its full year results in August and declared a fully franked final dividend of $2.10 per share.

This brought the CBA dividend for FY 2022 to a total of $3.85 per share, which was up 10% year over year.

The good news for investors is that the team at Credit Suisse is expecting another decent increase in FY 2023.

According to a recent note, its analysts are forecasting a fully franked $4.25 per share dividend over the next 12 months. This will be a 10.3% increase year over year and, thanks to recent weakness in the CBA share price, will mean a generous 4.6% dividend yield for investors.

Another positive is that although Credit Suisse only has a neutral rating on the shares of Australia’s largest bank, its price target is meaningfully higher than current levels.

Credit Suisse has a price target of $102.80, which implies potential upside of almost 11% for investors. Including dividends, the total potential return widens to almost 16%.

The post How big will the CBA dividend be in 2023? appeared first on The Motley Fool Australia.

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More reading

• Why is the CBA share price falling the hardest of the big four today?
• What’s with the CBA share price on Wednesday?
• Here’s why I decided to buy each of the big 4 ASX 200 bank shares
• Looking to buy CBA shares? Here’s how the bank’s balance sheet stacks up
• Which ASX 200 bank share will win the great tech battle?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Sometimes we can make the mistake of avoiding an investment purely because it has gone up. The Pilbara Minerals Ltd (ASX: PLS) share price has made a tantalising gain of 30% in a month, even with today’s 7% dive. So, could passing up on Pilbara Minerals shares be a costly decision?

We take a look at what some experts in the industry think of this ASX-listed lithium titan following its remarkable performance. Could there still be money left on the table, or could it be overblown hype on the future of lithium?

Could Pilbara Minerals shares still light up a portfolio?

Peering back at the end of 2020, Pilbara Minerals was beginning to tap into a resurgence in lithium expectation. The company’s shares had tripled in value that year, despite recording a loss of $57 million on $105 million in revenue.

Fast forward to today, and Pilbara Minerals’ fundamentals have grown into the prior speculation. At the end of June 2022, the $14.5 billion company posted an astounding $561.8 million profit on $1.19 billion in revenue. That’s right, a 47% profit margin… incredible!

However, the future success of Pilbara Minerals and its shares is likely to be highly contingent on where the lithium price heads next. Fortunately, the team over at Wilsons believes there are even brighter days still to come for the critical battery material.

As previously penned by my colleague, Tony Yoo, Wilsons is noticing a potential dislocation between expectations and future reality for available lithium supply. As such, the team at Wilsons said:

We believe there could be significant upside to the forecast long-term price if there is a supply-demand imbalance and the current price profile looks too pessimistic.

Wilsons also pointed to Pilbara Minerals as one ASX lithium share they like in the space.

In addition, private client advisor Jean-Claude Perrottet of Medallion Financial Group labelled Pilbara Minerals shares a hold in a recent article on The Bull. According to Perrottet, “The outlook is bright if prices remain elevated”.

What about valuation?

Right now, investors in Pilbara Minerals shares are getting a lithium producer at around 26 times price-to-earnings (P/E). For comparison, its peer average earnings multiple sits around 19 times.

However, the company is currently saddled with cash. As at 30 June 2022, Pilbara tallied up $591.7 million in cash and equivalents, with only $234.7 million in debt. This gives it a net cash position of approximately $357 million.

The Pilbara Minerals share price has far exceeded the returns of the S&P/ASX 200 Index (ASX: XJO) over the last year. The high-flyer has run up a 108% positive return for its shareholders, while the benchmark has fallen 12%.

The post Exploding 30% in a month, is it too late to buy Pilbara Minerals shares? appeared first on The Motley Fool Australia.

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More reading

• Our 4 favourite lithium ASX shares right now: Wilsons
• Are you attracted to ASX losers?
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here’s which ASX lithium shares investors have been loading up on this month
• Why is the Sayona Mining share price in the doldrums this week?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Ramsay Health Care Limited (ASX: RHC) share price is starting the week in the red.

In morning trade, the private hospital operator’s shares are down 7% to a two-year low of $56.10.

What’s going on with the Ramsay share price?

The Ramsay share price has come under pressure on Monday after the company released an update on takeover talks with a consortium of financial investors led by KKR.

As a reminder, earlier this month Ramsay received correspondence from KKR regarding its conditional, non-binding, indicative proposal to acquire Ramsay by way of a scheme of arrangement.

That correspondence noted that the consortium was not in a position to improve the terms of the alternative proposal. Furthermore, it highlighted that the information provided in Ramsay’s FY 2022 results implied that there was meaningful downward pressure on the valuation proposed under the alternative proposal.

According to today’s update, since the receipt of this correspondence, Ramsay and its financial advisers have engaged with the consortium and its advisers in an effort to understand whether a new proposal could be put forward that would provide appropriate value for shareholders and be able to be implemented in a reasonable timeframe.

However, as you might have guessed from the Ramsay share price performance today, it has become apparent to the company that the consortium is unable to provide a new proposal at this time.

As a result, the two parties have mutually agreed to terminate discussions.

Ramsay will now focus on driving its strategy to be a leading integrated healthcare provider of the future and the creation of long-term value for shareholders. The company intends to provide a business update in November.

The post Ramsay share price sinks 7% to two-year low on failed takeover deal appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There are personal reasons to sell a stock. And there are investing-related reasons to sell a stock.

Most often, personal finance drives the decision to sell a stock because you need the money. You need to pay your child’s tuition. You need to pay the IRS. Your dog tore her ACL and she’s going to need a bionic knee (apparently). One reason we all invest is to have the money we need when we need it. 

Whenever you sell, though, you’re giving up the long-term growth potential of your investment capital. There are times when you want or need to do that, but it’s important to keep that general principle in mind.

By contrast, sometimes you should sell a stock because you’ve made an investing mistake. Your initial analysis turns out to have been wrong, you’ve lost faith in management, or the company has done something else to change your mind about its future. For me, though, it’s the personal reasons that are more painful. Here’s why.

2022 is a bear market

This is a bad year to be selling stock. Ideally, you’d have a cash cushion to cover unexpected financial needs. That way, you wouldn’t have to sell stocks in a down market.

I take a different approach. I’m usually 100% invested in the market, because unfortunately for me, I don’t have a saver’s mentality. If I have cash, I want to spend it. When I was a kid my father once gave me $20 to put in my wallet for emergency situations. You know what I did with that $20? I spent it. “I really need this video game, it’s an emergency.” So to trick my brain, I “spend” money investing in stocks.

The problem with that approach is that when an actual financial emergency pops up, I don’t have that cash to cover it. Instead, I have to find a stock to sell, even though I hate doing it.

The advantage of this approach is that it has worked to instill patience in my investing most of the time. If I don’t need cash, then I just don’t sell. That’s helped me stick with a stock even when it goes through a bad period.

A case study: My dog Vanna just tore her ACL

Still, it can be painful when those emergencies happen. When my dog tore the canine equivalent of her ACL, I had to raise some cash. Which of my favorite stocks am I going to sell to raise some cash? This is going to hurt. But I love my dog more than my stocks. So I had to sell something.

The problem is that I hadn’t lost faith in anything about the companies whose shares I owned. Ironically, I ended up choosing Freshpet, Inc. (NASDAQ: FRPT), which like many stocks has had a terrible year.

I know why Freshpet has seen its share price fall. inflation is awful, and people are cutting costs and nobody wants to spend a lot of dollars on high-end meat for their dogs. The other day I was shopping in the grocery store. And some guy, out of the blue, started talking to me about how crazy it was that people are buying refrigerated food for their pets.

I didn’t mention that I do that (I try not to argue with strangers in grocery stores). But it occurred to me that a lot of people don’t like spending a lot of money on their dogs, especially in bad economic climates. 

Sometimes I talk up my stocks with strangers. And dog people, we’re always running into other dog people. So I’d say, “Hey, have y’all tried Freshpet? My dog loves it.”

They would say, “Oh yeah, how much does that cost?”

I would say, “It costs a lot. It’s on the high end.”

They would say, “I really don’t want to spend that much.”

Forced to make a decision between Freshpet and the other high-conviction stocks I own, conversations like that would lodge in my brain. It is expensive dog food. Maybe it caters to a more high-end niche and a lot of people don’t want to spend the money. In the end, my Freshpet investment went toward saving my dog.

Have a cash cushion!

No hard feelings, though. I love my dog more than my Freshpet shares. And I’ll be back when I raise the cash.

If I had a bunch of cash in a savings account, or even a checking account, I would still have my Freshpet shares. I’d be able to participate in what I hope is a big rebound, as I still think Freshpet could be a 10-bagger from here.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post When should you sell stocks? appeared first on The Motley Fool Australia.

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Taylor Carmichael has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Freshpet. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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