Investing not only requires you to review and monitor the businesses that you own.
It also requires you to have a strong stomach to manage your emotions, as hard-earned money is involved.
What this means is that when faced with the emotions of greed and fear, you need to react appropriately to ensure you enjoy a favourable outcome.
With the market surging in recent weeks, investors find themselves faced with a “happy problem”.
Many stocks are soaring to their 52-week highs or even all-time highs, prompting the question as to whether you should take your profits off the table.
We dissect how you should react when faced with such a situation.
Don’t be distracted by the share price
First off, most investors may get too obsessed with the share price and forget that it represents an interest in a living, breathing business.
A company’s share price is not merely a ticker symbol with a price attached to it.
Behind each company is a business selling goods and services.
Warren Buffett, arguably one of the most successful investors of our generation, remarked that “when the business does well, the stock eventually follows”.
There is truth in these words, as businesses that consistently grow their profits and free cash flow have been accorded higher share prices over time.
Thus, your focus as an investor should be to monitor the health of the underlying business.
As the business grows over time, so will its share price.
Assessing the business
Going back to the question of whether you should hold, sell or even buy more of a stock when its share price hits an all-time high, there is a key question you should ask yourself.
Is the business improving, and does it have the potential to continue growing?
If the answer is yes, then you may have a long-term winner on your hands.
A company that is seeing consistent increases in its top and bottom lines, along with its dividends, must be doing something right.
Selling such a business prematurely may mean you miss out on a substantial chunk of future profits.
Take Sheng Siong (SGX: OV8) as an example.
The supermarket operator recently saw its share price hit an all-time high of S$2.05.
Its first quarter of 2025 results were solid, with net profit rising 6.1% year on year to S$38.5 million on the back of a 7.1% year-on-year increase in revenue.
The retailer also gave investors a glimpse of more to come as it secured six additional stores that will be opened by the third quarter of this year.
Another company that recently hit an all-time high is Centurion Corporation (SGX: OU8)
The dormitory owner and operator saw its share price soar more than 83% year-to-date to hit an all-time high of S$1.81.
The group is moving ahead with the proposed listing of a REIT called Centurion Accommodation REIT with an initial portfolio value of S$1.8 billion.
The two examples above show that positive business developments usually result in a company’s share price heading higher.
Runaway valuations
There could be instances where a company’s share price heads higher without any discernible reason.
When this happens, its valuation could hit stratospheric levels with no explanation.
You need to carefully assess if the valuation is too frothy and is not justified by the business’s fundamentals.
In such cases, there could be a valid reason to sell your shares if you believe there is unwarranted exuberance.
Unlimited upside
There is one golden rule you should remember when faced with record share prices.
By holding on to the stock even as it surges, you can enjoy unlimited upside if the business continues to grow.
Contrast this to the act of selling the stock to realise your profits.
Selling may provide you with instant gratification and bragging rights, but you will also miss out on subsequent gains if the stock continues to double or even triple.
There is also the headache of figuring out where to redeploy the proceeds, which can be a tough job when the market keeps rising.
A simple example of this is Apple (NASDAQ: AAPL).
Shares of the iPhone maker were trading around US$30.82 back in July 2015.
If you held on to the shares for a decade, you would have made more than sixfold of your initial investment with the recent share price at US$211.16.
That’s not even counting the dividends that you will enjoy along the way.
Get Smart: Compounding at its best
It’s a happy problem when one of your stocks sees its share price hitting an all-time high.
However, you need to remain calm and think about the prospects of the company.
If there is strong potential for the business to continue growing, you should hold on to the stock or even buy more to enjoy the compounding effect.
But if the stock is overpriced, there is a valid reason to divest it.
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Disclosure: Royston Yang owns shares of Apple.
