Q: CSU stock continues to power upwards and everybody seems to love it. This raises the possibility that it is, or will become, overbought. Can you suggest a sell-point and some metrics for determining when my csu holding should be lightened? If lightening, would you do this before or after Q2 report on Aug 7?
5i Research Answer:
CSU has gone up since it was $20 in 2006. On a valuation basis, it never really becomes cheap often and is often considered 'expensive'. But the good ones are worth a premium. Rather than saying 'sell at level $XX', which has been the wrong thing to do for 20 years, we would simply manage position size instead and sell when weighting becomes more than one's target. We would not ignore it completely but unless management changes or it blows up on a large acquisition (the former is possible one day if the CEO retires, the latter is far less likely considering its history) we would hardly worry about it too much. We have no reason to expect bad earnings and would be fine holding through them.