Micro Blog #11: Selling Is Harder Than Buying

Knowing when to sell a stock is one of the hardest things, when it comes to investing.

Many times the reason to sell is simply risk management, such as the case with my GE and MAT positions in 2015. These companies were struggling and there was ample warnings that things will get worse for them.

I could wait and see what happens, or I could de-risk my portfolio and move the money to other companies that are doing well. There are plenty of healthier choices in the market, so why take unnecessary risk?

Other times, it may just be that the stock has overvalued and I could trim it to get some cash, which I can then reinvest in a higher yielding stock. Thus increasing cash flow without putting in any new money. This is a good problem to have and a great way to increase cash flow.

There are also times, when I simply sell a position to fix a mistake. A mistake is when I bought a stock in a company thinking of it as something of a high quality, but then later the stock/company failed to meet my quality metrics. NYCB (a bank) is one such mistake. I just never had a good luck with banks. I sold NYCB after it was clear that dividend was at risk.

I don't like to hang-on to stocks in companies that are showing fundamental weaknesses or lack of quality in terms of credit rating, dividend coverage, or management execution.

Here is my sell record for 2015, you can see what happened to stock prices and dividends after I sold them. Several of them did cut dividends and hurt there share prices, while others did well:


Often I go back and review my sell decisions to see whether I'm being too cautious and try to learn from my mistakes.

Looking at the table above, I don't regret a bit that I sold GE, MAT, and NYCB. They all cut or suspended their dividends later.

I sold MO because I didn't like making money off tobacco company. The stock has done very well, but I just didn't like the business they were in.

Selling SYY, LEG and PG, I regret a bit, especially SYY which has appreciated over 60% since I sold it. On the other hand, I also did avoid several dividend cuts or suspensions.

Overall, selling decisions have been a mixed bag for me and I need to continue to work on them.

Comments

  1. Mr. ATM. You are not alone. I find selling tough too. I've never tracked it, but I'm sure I make as many mistakes on the way out (too early or late) as I do on the way in. Tom

    ReplyDelete
    Replies
    1. Thanks for sharing Tom. I guess, mistakes are part of the game.

      Delete

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