Do You Need to Run Your Winners?

Morningstar columnist John Rekenthaler looks at the evidence for holding on to your winning stocks or taking profits

John Rekenthaler 12 May, 2021 | 10:14AM
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The Debate

Earlier this year two British fund managers publicly squabbled over the trusted investment mantra of running your winners, a strategy where you hold on to the best performing stocks in your portfolio for as long as possible.

Lawrence Burns, from investment management firm Baillie Gifford, cited academic research showing that “a small number of superstar companies” accounted for the stock market’s gains. Stated Burns, “The other 99% of companies were a distraction to the task of making money.” For Burns, the results implied an obvious investment strategy: Hold the portfolio’s winners. Profit-taking can be “the worst possible mistake”.

Andrew Dickson, founder of Albert Bridge Capital, strongly disagreed. Three days later, he responded with “Baillie Gifford’s never-sell mantra is a song for fools.” Dickson sharply criticised both the academic paper, which had been presented “in a sensational way,” and Burns’ “after-the-fact diagnosis.” For those who lacked a time machine that would permit them to identify the stock market’s future stars, claimed Dickson, Burns’ advice was “the worst possible.”

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Security NamePriceChange (%)Morningstar
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About Author

John Rekenthaler

John Rekenthaler  John Rekenthaler is vice president of research for Morningstar.

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