Back in November last year, I did a post on “Value investing and soccer“. It touched how similar value investing and uncovering rising soccer players is. I quoted an example on Andy Carroll who was from Newcastle at that point of time.
As of Jan 31st 2011, Andy Carroll has moved to Liverpool with a second highest BPL record fee of £35 million. He was actually the most expensive player in BPL till Chelsea signed Fernando Torres for £50 million a few hours later. Andy Carroll, however, is still the most expensive English player. Personally, I thought it would take a few more years for Andy Carroll to move from Newcastle to a bigger club (moving away was a sure-bet but the question was when). Maybe Newcastle thought that the current price was right so selling Carroll was the best option for now.
It can be seen that when a player (company in the instance of investing) ceases to be attractive (i.e. the price is very much more than intrinsic value), selling for profit may prove to be a very good option. We can sell a company for a high price and buy more fundamentally strong companies with the same amount of money and let the money roll. In the arena of investing, I can think of Thomson Medical Centre. Even though the fundamentals of the company didn’t change, selling was the best option.