This is a tough one.
) has hit the $69 target price -- and then a bit -- I set when I added the shares to my Jubak’s Picks portfolio
on Sept. 21, 2012 at $63.75. The stock closed Wednesday at $70.73. That’s a 10.9% gain on this position in a little less than five months.
In my Jan. 25 post
on trading strategies for a momentum market I noted that it’s important to keep notes in your trading diary on how aggressive you think your assumptions were when you set an initial target price for a stock, and I used Nestle as an example.
My original assumptions, I felt then, were pretty aggressive back in September. That suggests to me that I shouldn’t just go ahead and raise the target price just to keep this position.
This says "sell" to me here.
The only caveat is that Nestle pays its 3% dividend just once a year a few days after the annual meeting. In 2013 that meeting is scheduled for April 11. So selling now means you give up a year’s dividend.
The decision on sell now or wait until April 15 or so comes down to how you read the risk in the current market. Frankly, eurozone politics make me nervous right now -- with Berlusconi closing the gap before Italian elections on Feb. 24 and 25, and a slush-fund scandal in Spain moving to the courts and a special prosecutor. (The "optimists" on Spanish markets say that since the Spanish courts operate at glacial speed, the move to the courts is actually a positive development. Although I respect that judgment, I find it slight support for Spain’s markets.)
My call is to sell Nestle now and take my profit so I’m selling the shares out of Jubak’s Picks Wednesday. If your read on European markets is more positive than mine, you’re likely to decide to hold on for the dividend.
At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did not own shares of Nestle as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here.