A Position Rebalance (HAIN)

For the Longer-term focused Portfolio that I share here weekly, I like to manage each position on a fairly even risk level. How I do that is maintain a similar percentage of space for each holding within the account. When a stock has a prolonged rally, the size of the holding grows to a larger percentage than the other holdings.

What I like to do when managing a portfolio is to make sure one or two positions don't get disproportionately larger than the rest. I like to keep a fairly balanced list of holdings, therefore when a stock becomes too large in my account, I simply trim off some gain and bring it back in line with the majority of holdings.

HAIN has grown 30% larger than most of the other positions in our Portfolio over the past few months, culminating today in a very large spike in prices. I'm not just selling to sell either. It was brought to my attention yesterday by a friend that HAIN was becoming quite extended on an intermediate term basis. Today is finally the day that it has moved beyond my "extended" reading. For all accounts I am bringing HAIN back into balance with the rest of my holdings; I'm selling 1/3-1/2 of the holdings I have in HAIN depending on the aggressiveness of each account. Basically for my shorter term, more active accounts, I am selling 1/2 of my total position. For the longer term accounts I am selling down 1/3 of the holding.

We've seen a large breakout from the prior consolidation and today's action has blown the stock beyond the upper Bollinger Band and has extended the stock more than 13% above the 20 WMA. While selling when these conditions are in place isn't always perfect, it does tend (roughly 80% of the time) to cause the stock in question to at least consolidate sideways or pull back into longer term support.

Again, do know that there is nothing wrong with reducing a winning position into extreme strength. What you don't want to do is try to call an absolute top for the uptrend. Basically you can trim your winners, but you can not sell all of the position. We never know where the top is; the top might be today or it might continue to rally another 100%, who knows. But when a stock reaches an extreme level I think it is prudent to re balance the holding back in line with the rest of your portfolio.