Opportunity cost over comfort, especially in the current market environment
I sold my ASML position recently at just above $1,000 per share, locking in a solid 40% profit. But this isn’t a bearish take in any way. In fact, it’s not even a mild concern. ASML is still one of the best companies in the world, an untouchable monopoly, and the definition of a “buy and forget” stock. I didn’t sell because something broke, quite honestly I’d be surprised if this was the last time I own the stock. The only reason I sold is because the rally has run far hotter and faster than I anticipated.
ASML was trading at multi-year, if not historical, valuation lows when I bought. Now the stock sits closer to its long-term average again, and that changes the risk/reward, especially considering the abruptness of this re-rating. I simply don’t think this is the moment where ASML doubles from here anytime soon, nor do I think it’s going to collapse. Most likely the stock goes sideways for a bit and that’s fine. But with this kind of volatility in the market, going sideways isn’t a luxury, but opportunity cost.
And that’s exactly where my decision came from. Not fear, not profit protection, not lack of conviction, just pure portfolio math. I don’t mind holding a stock that fluctuates. However, I don’t see much point in holding a stock at the 1–2-year price target I had envisioned when I bought it. The market hands out better alternatives almost daily.
That’s why I rotated the 10k from the sell straight into Visa. A company that is no worse than ASML in terms of dominance, moat, or predictability, just in an entirely different sector. Visa trades at a forward P/E of around 25, the same level it reached during the 2022 lows. Net income and free cash flow are growing in the mid-teens as always, revenue around 11%, and FCF margins are an absurd 56%. So why am I even talking about it? Everyone knows that Visa is an incredible business with a balance sheet straight from Buffett’s dreams. Visa prints cash, Visa grows, Visa compounds. There isn’t much more to add.
Again, ASML is a great company with potential for the future, but short-term I don’t see much more wiggle room. I just think Visa’s current setup offers a better balance of growth, valuation, and risk, and that’s what counts in my opinion. ASML remains a world-class compounder, and I’ll almost certainly own it again.
