I definitely tend to trade more than most here… What is driving this activity? I thought I would look back at my sales so far this year:
Jan 11 – sold WTRG. Quality downgrades paired with high valuation made it a poor fit for my portfolio. I like the idea of owning a water utility, but I need to find one with stronger quality metrics.
Jan 21 – reduced GOOG, concurrently with adding FB. Now have large positions in both rather than a double-max position in GOOG.
Mar 10 – sold GWW. Good company, but I never really warmed to it. It wasn’t a large position, so if I wasn’t going to build it further then selling made sense.
Mar 12 – sold SYY. Combination of increasing debt, weak dividend safety, and high valuation with arguably diminished forward prospects. I really like the company and their management, but the pandemic closures damaged them and it will take time to repair the capital structure.
Mar 23 – sold T on a downgrade from SSD. It was marginal quality to begin with, and the downgrade pushed it over the edge.
April 9 – trimmed GOOG slightly due to position size.
April 12 – trimmed SYK. Was working on expanding the breadth of my healthcare/devices holdings.
April 14 – sold GS. I really don’t like the company. I’ll blame a bad influence for causing me to purchase it in the first place.
April 16 – sold ORCL. Bought it a month earlier on valuation, dumped the entire position on the rebound. I believe other tech companies are better positioned long term.
April 19 – trimmed ADP, HD. Fully valued and exceeding position limits.
April 21 – sold SO. Marginal quality, fully valued.
May 7 – trimmed CVS. Position limits.
June 1 – sold HD to add a full position in LOW. No room to hold both at that size.
June 3 – sold OGN. Not interested in owning that spinoff (or most spinoffs).
Reasons for selling:
Quality concerns: WTRG, SYY, T, SOAdding a similar company: GOOG, HD, SYKPosition sizes: GOOG, ADP, HD, CVS
Bad fit for me: GWW, GS, OGN
Valuation trade: ORCL
I did reference valuation as a secondary consideration in multiple trades. When a marginal stock or a large position is substantially undervalued (e.g. CVS or T), then I struggle with greed and can be slow to sell. But when I believe it is more or less fully valued (not necessarily overvalued), then it is easier for me to move on and improve the quality or balance of the portfolio.
The only one which was really driven by valuation was ORCL. I bought it primarily because it was selling at a 30% discount. I sold it when that discount had narrowed to 15%, for a 20% gain. But I might have sold it anyways, even if the share price hadn’t responded? It is one of those “good enough” companies that pass the metrics but don’t inspire me with their quality and outlook.
Note that I revised my investment plan in early April, adopting an income-focused approach while also adjusting the way I treat my IRA balances (I had previously discounted them by 25% to account for taxes). These changes messed with some of my allocations, leading to some of the moves later that month.
The only transaction with tax consequences was (part of) the sale of SYY on March 12. All other transactions were in IRAs. I generally do not sell in our taxable account unless there are quality concerns, so the turnover there is low.