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u/Rmunu-12gmunu 1 day ago Discussion

Is it worth rotating between the Magnificent 7, or is it better to just never sell?

Let’s say you own several Mag 7 stocks and one of them has gone up significantly, leaving you with a 30%+ unrealized gain. At the same time, another Mag 7 company has dropped considerably and you believe it has become undervalued relative to the others. Would it make sense to sell some of the stock that has performed well and rotate that money into the one that looks undervalued? Or, assuming you have a long-term horizon, is it generally better to simply hold your positions and avoid trying to rotate between them? Right now I’m up around 80% on GOOG and 40% on MSFT, which is what makes me question whether rotating into another undervalued Mag 7 stock would actually be worth it or whether I should simply let the winners run. My thinking is that once a position reaches a 100% gain, it only needs to rise another 50% from that point for my original investment to reach 3x, and the percentage increase required to add another multiple of my initial investment keeps getting smaller as the position grows. So I’m wondering whether giving up that accumulated position to rotate into something cheaper actually makes sense, assuming I still believe in GOOG and MSFT long term. I’m curious whether anyone here follows this kind of strategy with the Mag 7 and how it has worked out compared with simply buying and holding. Thanks!
43 comments held Reddit says 0 on reddit ↗
  1. u/theunknown996 2 1 day ago
    Why is your investment universe limited to MAG7? It makes no sense. Just invest in whatever you think is undervalued.
  2. u/Rmunu-12gmunu OP 1 1 day ago
    Completely agree. Just imagine that you want to have a portfolio where one portion is allocated to top-tier tech companies like some of the Mag 7, ideally bought at attractive prices during corrections and held for the long term, while another portion is focused on value opportunities in other sectors. My question is that, in this kind of stocks with good fundamentals and solid results, is it better just to let time pass or move it from one to another if PE is below its historical average?
  3. u/No_Presentation9490 1 1 day ago
    Mag7 is not immortal. Don't get anchored to recent stock prices
  4. u/Halbaras 1 1 day ago
    It was only a few years ago that it was referred to as FAANG. The N didn't stand for Nvidia, and Netflix stock has fallen a long way from grace since then. Some of the names may well be the same in ten years but I'd be surprised if it's completely unchanged. The way Reddit talks about the Mag7 is often very reminiscent of the Nifty 50 and how a generation of investors called them 'one-decision stocks' that were 'of such quality' they'd overperform forever and you should buy and forever hold them.
  5. u/Bulky_Dingo_4706 1 1 day ago
    It should be called the Mag 5. Even NVIDIA is cyclical because of AI demand.
  6. u/enas333 1 17 hours ago
    I have to do a double take anyway when I see people talking about about big tech in a value investing sub.
  7. u/Swred1100 1 1 day ago
    The percentages don’t change, only the “look” of them do. If you’re up 100% in a stock, sell it all, then buy another - it still only needs to increase 50% to hit 3x. It just may not look like it because your “cost basis” on the new stock incorporates the 100% gain, but in reality your initial investment is still the pre 100% jump. Second, you shouldn’t look at their values relative to each other. You should look at their values relative to themselves. Idc if MSFT is valued higher than the rest of mag7, if MSFT is still below value.
  8. u/Rmunu-12gmunu OP 1 1 day ago
    Smart answer, thanks!
  9. u/ciarandeceol1 1 1 day ago
    Yes exactly this. I had Microsoft run up $100 recently and sold it off in a moment of emotion. A few days later when I calmed down and was thinking rationally again, I just put all my money back in. Nothing had changed in my investment thesis. There was no reason for me to sell other than panic. Now the 'look' of my percentages is different and that's all. It doesn't actually matter. This is the same logic I frequently see when people say they are afraid to average up on a stock. They have an anchoring bias to the original entry price preventing them from getting more gains.
  10. u/Wise-Comb8596 1 1 day ago
    Same with me and Google. Sold when Demis left. It’s been sinking since but I’ve continued to buy back and lower my average cost.
  11. u/ciarandeceol1 1 1 day ago
    Nice. Long term is the name of the game. Let your winners run.  The only time I'd advocate for selling is to sell half when you get a 100% raise, in order to get your money off the table and remove risk.  Best of luck with the investment. I am also holding Google long term.
  12. u/MioYatogami 1 1 day ago
    I only read the title: in general buy and hold outperforms hopping (human psychology and timing problem) but empyricly only 8% of all IPOs ever added economic value. We could make a definition that implies only those 8% are buy and hold, but this spans far beyond human life span…
  13. u/Bluebird-9641 1 1 day ago
    Trim your overweight positions and add to or buy the undervalued ones, that's portfolio management 101 if you want to go that route. Some never sell and just buy/enter a position on dips. Some swing trade. But option 1 is what a financial advisor would most likely recommend, and what fund managers do.
  14. u/Suspicious_Trifle_92 1 1 day ago
    Trim your flowers and water your weeds
  15. u/Green_Perception_671 1 1 day ago
    Trim the weeds when they die naturally, then panic and water the soil hoping a flower will grow, then trim the weeds when they grow back a little, then…
  16. u/cpeytonusa 1 1 day ago
    Fund managers generally have strict compliance rules that restrict them from holding more than a specified percentage in any one name. Private investors have no such restrictions. It is still wise to remain well diversified to limit downside risks.
  17. u/rosakelly21 1 1 day ago
    The concept of "rotation" relies on your special ability to tell the future to know when to "rotate". So yeah, if you can tell the future, "rotation" and lots of other gimmick strategies work great. If you can't tell the future, things become much harder.
  18. u/Educational_Rent2042 1 1 day ago
    I don't think it does. I think it requires exactly the same thought process that led you to believe that stock was good enough value to buy in the first place. Clearly if you invest you think you're able determine the difference in value between stocks at the start so why do you think you wouldn't be able to determine that when reviewing a position size. I understand the whole investing in quality companies thing but even a quality company has risks and so it's position sizing should be adjusted if its risk adjusted returns have worsened significantly.
  19. u/rosakelly21 1 1 day ago
    Fair enough, plenty of people in this sub have the ego to think that they can price equities better than all the Phds teams on Wall Street and investment funds.
  20. u/investingtruth 1 1 day ago
    Something to remember is that rotating out of a strong winner into a cheaper name also triggers taxes on those gains when you sell, which eats into the very compounding advantage you are trying to protect. If you still believe in both GOOG and MSFT long term, adding fresh new money to the undervalued name is something I'd prefer rather than selling your winner to just in order to rebalance.
  21. u/DOF1186 1 1 day ago
    +1 but u can trade more frequently in tax advantaged accounts like roth ira.
  22. u/ninjadude93 1 23 hours ago
    Not if you trade in your roth
  23. u/DramaticAlbatross 1 21 hours ago
    Unlike the amateurs, I have years worth of capital losses that I can use to zero out any gains no matter the size. . This is a highly advanced technique.
  24. u/Space-Ant992 1 19 hours ago
    Advanced money destroying techniques 👌
  25. u/pedrospecialk 1 17 hours ago
    Who’s gonna tell him about the $3k annual max
  26. u/vansterzzz 1 16 hours ago
    Let me show you my amc well regarded losses.
  27. u/imrickjamesbioch 1 13 hours ago
    Oh you on the Wendy’s assistant to the assistant manager career path as well, cheers!
  28. u/WolfetoneRebel 1 1 day ago
    No need to get cute. Look how long Amazon stayed flat.
  29. u/Tempest1897 1 1 day ago
    Only sell when your thesis changes. If you think it’s run too much but your thesis is still intact, trim and take some profit.
  30. u/Affectionate_Run3921 1 1 day ago
    You have to balance your comfort with concentration risk as well as the tax implications. I have large positions in Google, Apple, Amazon, and a couple of others beyond mag 7. I let my winners keep winning until they get to a certain size, which for me is not more than 10% of my total portfolio. Then I trim them periodically on strength to diversify… In general, always buy and never sell is my philosophy, but I do manage concentration of individual position with caps as described. This all said, VOO is the foundation of my portfolio and everything I described here is a growth sleeve. In general it does not make sense to frequently sell big gains and start new positions. You pay a lot of taxes in doing so, and most often this strategy doesn’t outperform buy and hold.
  31. u/Rmunu-12gmunu OP 1 1 day ago
    Nice strategy
  32. u/eloquenentic 1 1 day ago
    Do you own them in a tax free or a taxable account? That makes quite the difference.
  33. u/EpicOfBrave 1 1 day ago
    Stocks Go Only Up It’s impossible for SP500 to drop more than 10%. 3x LONG is free money. The easiest market ever.
  34. u/Gaba_My_Gool 1 1 day ago
    My goodness…these subs are so lame at this point. If you’re a real investor, hold on to your mag 7 positions unless you can see REAL cracks in their businesses. Right now, I’m looking at some beaten down industrial names with good fundamentals and solid, consistent business models that are relevant in almost any business cycle.
  35. u/Stock-Protection8795 1 1 day ago
    Just buy $MAGS
  36. u/Icy_Abbreviations167 1 1 day ago
    I wouldnt rotate just because one is up and another is down.
  37. u/Ok_Function2282 1 1 day ago
    You're killing compounding and killing yourself on taxes. If you just want to add to the ones that are struggling, it's probably better to do that with new money 
  38. u/bvenkat86 1 1 day ago
    There is no one right answer. Experiment and do what works the best for you. Keep Taxes in mind. I’ve changed my strategies over the years. What I’m currently running is with any of the Mag7 or super established companies, I buy and hold. I only “rotate” with my small/mid caps as they are more volatile.
  39. u/MostlyEquities 1 1 day ago
    Rotating isnt a bad strategy. There seems to always be 1 thats out of favour for a while and then sentiment changes and the stock makes a comeback
  40. u/McShagg88 1 1 day ago
    The MAG 7 are my go to every morning. If they're pooping out, I move on to something else. But typically at least one or two are worth trading.
  41. u/towardsfire9 1 1 day ago
    i'm in a similar boat. Have shares with very low cost basis but are mag7. I'm gonna be hit with heavy taxes if i rotate but if i don't rotate, my portfolio isn't going to be remotely what I see today if something -ve happens.
  42. u/AceStrikeer 1 1 day ago
    Rotation just based on your personal stock price gains? Not looking at the fundamentals? Are we r/trading?
  43. u/HabitExternal9256 1 18 hours ago
    I only buy and hold forever. How would you know when to sell?