NYU Portfolio Managers Battle Over Crocs

Managing stocks trading around their 52-week highs can be tricky. While investing pros will tell you not to be greedy, when is holding a hot stock foolish and when is it a good investment decision? NYU Stern's Investment Analysis Group (IAG) faced this question when they decided to toss Crocs CROX, and it's one that many investors face on a regular basis. What is it about a high-flying stock that can scare some investors away?

The Battle Meeting

The IAG is an undergraduate investment club that gets together every Friday night to talk stocks. Typically, a few members will present a stock to add to one of the group's portfolios ("All-Star" and "Initiative"), but on Oct. 12, the group's two portfolio managers went head-to-head over Crocs, the makers of the eponymous popular plastic shoes.

Until this point, Crocs had made up around 13% of All-Star's holdings, and portfolio manager Neal Sangani (senior) wasn't ready to sell any time soon. However, Initiative's portfolio manager, Todd Tamagnini (senior), felt that Crocs had reached the point where it should be sold to lock in the group's gains .

Enter the "battle meeting," where Sangani and Tamagnini had a chance to have it out over whether the stock should stay. Ultimately, IAG members decided that cashing out Crocs would be the best solution, but Sangani still feels the group should have stuck it out longer.

On his blog, Sangani wrote, "This is a company with an impressive, but short operating history, which creates sensitivity to near-term earnings or projections. And of course, given the strength of its business, this is usually a company at the fearful, dreadful, absolutely and utterly terrifying level known to most as the '52-week high' ... When it comes to growth , IAG usually screws up big."

Can the 52-week high really have that impact on young or new investors?