Sell These 4 Stocks and You'll Kiss Retirement Goodbye
Dec 31st 2012 5:19PM
Updated Dec 31st 2012 5:26PM
Do you know how much you'll need for retirement? Everyone's answer is different, so let's try a hypothetical situation.
Let's say you're 50 years old, earning $80,000 per year. You plan on retiring at 68, and want to save enough to live on the same income until you're 90 -- without relying on Social Security.
How much would you need to have saved when you retire? Go ahead, write it down. I'll wait here.
The correct answer: $2.2 million.
Kudos if you're on track. But according to recent surveys, most people aren't. In fact, two-thirds of American workers have saved less than $50,000 for retirement .
Thousands are in for a rude awakening. Panicking is not the answer; making smart money moves now is.
Unfortunately, there's one huge mistake that both amateur investors and professionals routinely make that robs them of a comfortable retirement: Selling their winning investments too soon. Read below, where I'll explain why this is such a big mistake and tell you about three companies that you'd be crazy to sell right now.
The desire to "lock in" gains
Many a seasoned investor will tell you that until you've actually sold a stock, any gains or losses you've made are illusory; they don't count until you've cashed out. Given that fact, it's commonplace to sell stocks that have gone on a great run and "lock in" those gains.
That's partially what our own Todd Wenning was thinking when he told investors that Apple (NAS: AAPL) was worth selling back in March 2010. His reasoning: "Apple doesn't have the high-growth potential it used to. After all, it is a $190 billion company, and a double in price from here would make it ... larger than ExxonMobil. Yes, it's possible, but it seems improbable -- at least anytime soon."
Well, since 2010, Apple has increased revenue by 140%, and earnings per share by a whopping 190%! Shareholders who held on have seen their stake rise by over 145% -- far outpacing the S&P 500.
When we're willing to part ways with companies that we acknowledge as being ahead of the curve on innovation and best-in-class within their industries, we're also deciding to part ways with the chance to earn the kind of returns that can provide a very comfortable retirement.
Here are four other companies that I think fit that mold.
Don't bet against the future of manufacturing
The Industrial Revolution allowed certain products to be manufactured at a pace that was dizzying to the pre-industrial mind. Millions of widgets rolled off the assembly line for mass consumption. But there's one problem this paradigm will be facing in the 21st century -- it's virtually impossible to customize such products.
Enter 3-D printing, which could one day meet your every product need. These printers -- think of them more as mini-manufacturing plants in your home -- could one day customize everything from a new set of kitchenware to a pacifier for your newborn baby.
The two companies spearheading the 3-D printing revolution are Stratasys (NAS: SSYS) and 3D Systems (NYS: DDD) . And though the companies' stocks are up 150% and 250%, respectively, they are still relatively small compared to their potential markets in the decades to come.
Don't bet against natural gas
Shares of Westport Innovations (NAS: WPRT) , the company designing automobile engines that can run on natural gas, have risen more than 138% in the past three years, but has yet to make a profit.
Westport's first major venture is in providing natural gas engines to long-haul truckers. If all goes well -- and with the build-out of America's natural gas highway and a number of recent order announcements , it looks like it will -- a move to commercial automobiles and locomotives would be next. In 2011, Westport shipped just 5,739 units. If the conversion to natural gas continues, that number could explode exponentially over the next 10 years.
Don't bet against a connected China
Don't be scared into selling shares of Chinese search leader Baidu (NAS: BIDU) . Though its shares have surged more than 650% since 2009 -- and are trading at 23 times earnings -- the company still has lots of room to grow.
Unlike the U.S., where about 77% of residents have readily available access to the Internet, China's base of users still has a long way to go. According to recent studies, the Internet penetration rate in the country is still at just 37.7%.
Those numbers are almost assured to grow, and the Chinese government has pledged to make the minimum wage expand by 13% per year until 2015 . As these two forces combine, there will be a lot more disposable income in the country. That means advertisers will be willing to pay Baidu even more for ad space. With revenue growing by 60% so far this year , and the company announcing that it'll be taking its service beyond China's borders , this growth story is just getting started.
Along with Apple, Stratasys, 3D Systems, Westport, and Baidu are all active recommendations of Motley Fool Co-Founder David Gardner, who selects stocks for our Stock Advisor and Rule Breakers services.
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The article Sell These 4 Stocks and You'll Kiss Retirement Goodbye originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Apple, Stratasys, Westport Innovations, and Baidu. The Motley Fool owns shares of Apple, Baidu, 3D Systems, Stratasys, Westport Innovations, and ExxonMobil and has the following options: short JAN 2014 $55.00 calls on 3D Systems and short JAN 2014 $30.00 puts on 3D Systems. Motley Fool newsletter services recommend Apple, Baidu, 3D Systems, Stratasys, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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