If you have been following my blog for some time now, you will know that I do not sell stocks very often. The stocks I tend to buy, the real blue chip, dividend increasing type of companies never give me much reason to sell. This has worked in my favor more often than not. However, if I look back at a post I did on one of my sales, here, I wrote about why I was selling the Canadian telecommunications company BCE.
In that post I didn’t hold much hope for the stock. Revenues were down, earnings had been pretty much flat, and there had not been a dividend increase in quite some time. Looking back not, I am surprised I even bought it!. I sold is around the mid $20’s. Today, a deal was just announced that the company has been purchased for $42.75 – pretty, much double what I sold it for.
As part of learning, it is important to look back at prior decisions to see what has worked and was has not worked. This trade obviously did not work – I lost out on a large potential gain that would have been one of the best performers in my portfolio. As I stated earlier, I don’t sell very often. In this portfolio of dividend paying stocks, one of my criteria is that the stocks I hold much show consistent growth in their dividend year after year. BCE had not done that in a while – you can see that here.
Investors need to choose an investment philosophy and stick to it. The research I have done, and the experience I have gained, says that you lose the most when you don’t follow your chosen investment criteria. In this case it burned me, but I can think of others, such as my quick buy and sell of a company called Microcell in the mid-90’s that was outside of my criteria and I lost about 50% of my money. I don’t think I would have done anything differently with regards to BCE – the fundamentals were not there to be a good dividend stock and I sold. I will still hold on to my criteria and invest according to it.
Even though I’m a long fan of buy and hold, sometimes you just need to sell. It’s hard to sell and then have the stock go up on you but on the other hand, it’s even worse to have the stock go up 10 fold and then drop back down to close to original purchase price.
While I don’t agree that one should always stick to their plan. If you see something that makes you feel the company is just heading down, it’s time to get out.
At the time, you made the right decision. Although BCE was paying a healthy dividend (probably in the 4% range), its stock price was stuck around $25 and dividend growth seemed unlikely based on past performance. So all you were getting was the yield.
I did an analysis on my site and I believe that private equity over payed for BCE. But I am not complaining as I was one of the investors that held on.
AJ
I like to invest for dividend growth as well, but I don’t think investor’s should skip good opportunities just because it doesn’t fit with the main strategy they use. What if there are only so many good dividend growth stocks out there and the investor see’s a few stocks that have outstanding growth but no dividends… should that investor skip the opportunity to take part in the capital gains because it doesn’t fit with the dividend strategy?
I love the dividend growth strategy, but I like a few other strategies too. I think an investor should choose a combination of the best from each world.