Defining Puke Point

The world of investment is filled with actions, emotions, decisions, and, therefore, you will come across many real-life lingos that go well with the situation of an investor. Puke is a slang term in finance where an investor decides to sell a stock or other asset despite the loss. The point where the investor wants to get rid of a stock that is plummeting in value in order to prevent further loss.

It’s an act of getting rid of a stock or asset. But, if it’s a loss for someone, then it must be a profit for others. The puke point comes as an opportunity for shrewd investors for buying value stocks at a discount.

Puke Point & Example

The term Puke Point, originated in the early 2000s by analyst Dennis Gartman, from Virginia. Many investors agree with this feeling of puckishness when they sell stocks at a loss to control the damage.

Though selling a stock in such a situation is not in the best financial interest, the reasons often include preventing further losses or to free-up Capital to use in more profitable ventures. For example, an investor may have bought a stock at Rs. 100 and it is now trading at Rs. 70 because the company is at its low. Later, the analysts indicate that price will continue to drop. At this time, the investor would panic and sell the stocks at Rs. 70 before an even more significant Depreciation occurs. This is a Puke Point for the investor.

Reaching a Puke Point all depends on the individual investor’s threshold of pain. Everyone has different risk bearing capabilities, for instance an investor who is deadly loyal to the company would not even give up if the price is going below its value. Some investors would immediately sell and switch, and somebody with a long-term horizon and well diversified Portfolio have an optimistic view and also a higher threshold for pain.

On the other hand, some investors eagerly wait for the Market to turn highly volatile where certain stocks hit the Puke Point so they could bargain to buy them at cheap. This is done with research & confidence that these stocks will go back up again soon and profit.