When to Sell?

[Uccmal]

I will add that it is partly situational.  Capital gains tax for me may easily equal my annual salary in years going forward, so avoiding it until I leave my job, is important as well.  This wasn't an issue until more recently.

[jay21]

 

As to BAC, WFC, And JPM, I see these as return to value/ weak moats.  I will hold them until the overall market is very clearly frothy, they are bringing in obscene profits, and we are hearing about

some sector where ridiculous lending is occurring.  That should be an obvious point and is still very far away. 

 

Does this mean you think they have weak moats?

[rjstc]

You guys are mostly on the money.

 

I have a couple of sell regrets.  I bought Leaps in SBux, AXp, and a couple of other companies in March of 2009, at their generational lows.  Had I just converted the Leaps rather than selling I would have made more on those two stocks than the others I have bought since. 

 

Now, my reasons for selling were likely related to the macro environment at the time, being unstable.  SBUX, I bought leaps just under $10 - its a moat.  AXP, I bought leaps at the very bottom - the stocks on both are up 5 to 6 fold in 4 years.

 

I am determined to keep some of my deep value moat, or weak moat stocks going forward.

 

I have managed to hold RBS preferreds that are yielding around 16-18% dividend on purchase price.

 

Seaspan is yielding around 12% on pp, so far.  Not likely to sell anytime soon.

 

As to BAC, WFC, And JPM, I see these as return to value/ weak moats.  I will hold them until the overall market is very clearly frothy, they are bringing in obscene profits, and we are hearing about

some sector where ridiculous lending is occurring.  That should be an obvious point and is still very far away. 

 

Aig I will hold until it is trading on par to other "good" P&C insurers - 1.2-1.3 book at this moment in time, which would be around $80 per share. 

 

Its really hard, patient work to develop good positions.  I am more hesitant than in the past to trade what I have gotten to know for something I dont know.  I am working on the premise it takes  me a couple of years to get to really know a company - this is the area where my greatest all time hits have been.  My biggest gains have never come from Graham stocks except where Graham and Buffett merge.

 

I like your thinking however have one question. WFC. Buffett seems to think of this as a wide moat. Why do you think of this as a weak one.

[Uccmal]

Maybe I didn't phrase that right - Their moats are probably fine.  It's the lending standards that get out of whack. 

 

Banking is very clearly a cyclical business, including WFC.  Every 10 to 15 years the banks underwriting standards and risk control degenerates to the level we saw in California in the early 90s, and them again in 2004-2007.  It will almost certainly happen again some day.  If you bail at the top of the cycle (probably too early in my case) you can buy them back at steep discounts a couple of years later. 

[rjstc]

Maybe I didn't phrase that right - Their moats are probably fine.  It's the lending standards that get out of whack. 

 

Banking is very clearly a cyclical business, including WFC.  Every 10 to 15 years the banks underwriting standards and risk control degenerates to the level we saw in California in the early 90s, and them again in 2004-2007.  It will almost certainly happen again some day.  If you bail at the top of the cycle (probably too early in my case) you can buy them back at steep discounts a couple of years later.

 

Now I understand and I completely agree. I've done that with C and BAC in the early 90s. Oil stocks when the price of a barrel got down to the mid teens and many people thought the glut would last forever. Also during the rolling depressions in different segments of the economy.