Have you ever watched a stock you absolutely love climb so high, so fast, that your finger starts hovering over the sell button even though everything in your gut screams “this thing is going higher”?
That’s exactly where we found ourselves this week with one of the best-performing names in the portfolio – a premier investment bank trading just shy of its all-time high. After an incredible run that handed us nearly 50% gains in under a year, we decided it was time to book some of those profits. Not because the story has changed – far from it – but because disciplined investing sometimes means taking money off the table when everyone else is greedy.
Why We Just Trimmed Goldman Sachs at $835
Let me paint the picture. The financial sector has been on an absolute tear lately. Rate cut expectations, a friendlier regulatory environment, and most importantly, a genuine resurgence in deal-making activity have lit a fire under the big banks. And nobody embodies that revival better than this 150-plus-year-old Wall Street titan.
We executed a modest trim – selling roughly 5% of our position – at roughly $835 per share. That single trade locked in gains of approximately 48% on the shares we originally bought back in December 2024. To put that in perspective, the broader market is up around 25% over the same period. This wasn’t just dead money – it was a home run.
The Technical Setup Was Screaming “Take Something Home”
Look, I’m not a chart wizard who lives and dies by squiggly lines, but sometimes the message is too obvious to ignore. After recovering every single point lost during that bizarre post-earnings sell-off in October (when the stock dropped 5.5% despite beating on both top and bottom lines), shares powered to a record closing high just under $834 in mid-November.
A brief three-day pullback gave way to strength again, and by early December we were staring at gains in nine of the last eleven sessions. The stock was less than 1% from its all-time closing high. When momentum gets that stretched, prudent investors start thinking about ring-fencing some profits.
Add in the fact that the S&P 500 Short-Range Oscillator had climbed to 3.02% – knocking on the door of the 4% level that technical analysts consider officially overbought – and the decision became even clearer. We’ve been aggressive buyers when that same oscillator was flirting with oversold territory just weeks ago. Fair is fair; markets move in both directions.
Replenishing Cash After a Buying Spree
Another factor? Opportunity cost and dry powder.
Over the past month we’ve put fresh capital to work in several names while the market was wobbling. Those purchases felt like stealing at the time, but we hadn’t done much selling to fund them aside from our complete exit from an entertainment conglomerate that had lost its magic. This modest Goldman trim helps bring our cash level back to a comfortable range without disrupting the core holdings we believe in.
In my experience, the investors who survive – and thrive – over decades are the ones who consistently raise cash near highs and deploy it near lows. It sounds simple until emotions get involved. Having cash when others are panicked is a superpower.
“The investor’s chief problem – and even his worst enemy – is likely to be himself.”
– Benjamin Graham
Make No Mistake – We Still Love This Franchise
Selling 5% of a winning position is not a bearish statement. If anything, it’s the opposite.
Investment banking is cyclical by nature, and right now the cycle is turning decisively upward. Merger announcements are picking up steam after being dormant for nearly two years. Equity underwriting desks are finally busy again. Trading revenue – both FICC and equities – continues to benefit from elevated volatility and healthy client flows.
Perhaps most exciting is the backlog. CEOs and boards sat on their hands through 2023 and most of 2024 waiting for clarity on rates and the election. That clarity has arrived. The pipeline for both M&A and capital raises looks stronger than it has in years.
- Global M&A volumes are already showing double-digit year-over-year growth
- IPO filings have surged since November
- High-yield bond issuance is on pace for its best quarter since 2021
- Private credit continues to explode, creating cross-selling opportunities
This bank sits at the very center of that revival. Their franchise is arguably stronger today than it was pre-financial crisis, with a cleaner balance sheet, higher returns on equity, and a management team that has proven adept at navigating different market regimes.
Position Sizing Matters More Than Most Admit
One subtle point that often gets lost in these discussions: individual position sizing can become a risk factor all by itself.
When we initiated this position a year ago, it represented a normal weighting. Thanks to strong price appreciation (and frankly, us being right about the thesis), it had grown to become one of our largest holdings. Trimming brings it back closer to our target allocation without forcing us to abandon a name we continue to rate as a long-term compounder.
Think of it like gardening. You don’t rip out the healthiest plant just because it’s growing faster than the others – you simply prune it so the rest of the garden gets sunlight too.
What Would Change Our Mind?
Fair question. Under what scenarios would we reconsider our positive stance?
- A material slowdown in deal announcements that persists for multiple quarters
- Regulatory surprise attacks that specifically target the investment banking model
- Credit markets seizing up again (which would hurt trading revenue)
- Management abandoning capital return priorities in favor of reckless growth
None of those seem particularly likely right now. If anything, the probabilitistic setup continues to improve.
The Bottom Line
Taking profits never feels as good as riding winners higher, but history shows that investors who periodically harvest gains and maintain discipline dramatically improve their long-term results.
We now own fewer shares of an outstanding company at a slightly richer valuation than we did last week – but we own them with close to 50% embedded gains locked in and fresh cash to deploy the next time the market gives us a discount.
That’s not abandoning a winner. That’s compounding with confidence.
And honestly? After watching this name deliver results far beyond our initial expectations, I sleep a little better knowing we banked some of those gains while still maintaining meaningful exposure to what remains one of the highest-quality franchises on Wall Street.
Stay disciplined out there.
