We are selling the remaining position of one of our holdings that greatly disappointed me. While I believe that the company will likely thrive again in the future and ultimately reach my original expectations of growing again and capitalizing on its strong brand, the sharp correction in the market allows us to move into a better long-term opportunity in my view. The return to my updated target for our sell is about 38%, while my best guess is that our buy could return 66% over the next year.
The company we are buying is one that I have followed closely now for six months. It's not widely known, but it is one of the premier manufacturers of servers and related components. I am impressed by their steady long-term growth, high inside ownership and very low valuation. It has been successful due to its leading-edge energy efficiency focus as well as the total cost of ownership due to the way they pre-configure their product. I am a bit concerned that we are doubling down on INTC to some degree here and will keep in mind our combined exposure.
We are also trimming one of our Healthcare names. You might recall that we added on 8/3 to the position, and it is up only slightly. I would point out that the market is down sharply from then (and so is our new purchase). Rather than focus on cost, I look at what I expect the stock to return in the future. In this case, our expected return currently on the partial sale candidate is 39%, which is the lowest of any name in the model.
It's worth repeating that as a result of the sharp pullback in the market, I have continued to reassess each of our holdings and, in many cases, have adjusted targets lower. While all of my targets may be too high or too low (they seem too high but are grounded in very reasonable assumptions), their relationships relative to one another are likely realistic.
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