The A2 Milk Company Ltd (ASX: A2M) share price has absolutely rocketed this year. It took 6 months to go from $2 to $3, two months to go from $3 to $4, and just one month to go from $4 to $5. The share price is up 145% this year:
That's why I think it might be time to consider selling off some of your A2 Milk shares. The company's price looks to have moved beyond all rationality in my opinion, as it is currently priced at around 43x earnings. Management has also announced a possible buyback, which looks rather ambitious at today's prices – generally the idea is to buy back shares at a low price, to get more bang for your buck.
I recently sold half of my stake in A2, as it had grown to more than 20% of my portfolio. It's not that I think it is a bad company or unlikely to grow further – quite the contrary. With its expansion into the USA, China, and the UK, A2 could become significantly larger than its current size over the next 10 years.
It's just that today's prices already bake in a significant amount of growth, and if you've held for more than a year A2 has likely become one of your largest positions too – and it looks distinctly overpriced. That's why I'd consider taking some profits on A2 Milk today.
