Thursday, September 26, 2013

Recent Sells

Well Wednesday brought about some changes to my portfolio.  This is something I've been thinking about doing for a while with two of my positions.  Both Caterpillar and Intel are great companies although they've fallen on hard times.  Caterpillar is suffering from the slowdown in the global economy leading to lowering demand for their products.  Intel has been late to the game in mobile/tablets and is trying to make up ground.  Earlier this year Caterpillar increased their dividend by 15% which I took as a very positive sign from management.  Lately though I'm not so sure about it.  Intel failed to increase their dividend after four straight quarters of paying $0.225 per share and they are struggling to make inroads into mobile.  I reduced both positions on Wednesday morning in order to be able to put that capital to work in companies that I feel have better prospects going forward and to gain exposure to another sector.



I sold 45 shares of Intel (INTC) for $23.79 each.  I had originally purchased the shares by having a put option that I had sold was exercised.  My per share cost basis on these shares was $24.56 so I took a loss on the shares of $0.77 per share or $42.59.  Not a horrible loss considering I was in the black when you count dividends received.  These shares were held for over a year and so they'll be taxed at the long-term capital gains tax rate.  While the loss isn't significant, any bit to try and pull down my net gain from selling off my Halliburton shares is welcomed.  This ended up reducing my position by about 1/3 and I now own 107 shares of Intel.

I also sold 13 shares of Caterpillar (CAT) for $85.43 each which gave me $1,102.62 in cash.  My total cost basis on these shares was $1,079.54 or $83.04 per share.  So after commission I made about $1.78 per share for a total profit of $23.08.  I ended up reducing this position by about 1/3 as well and I now own a little under 29 shares.  These shares were held for less than a year, as they were purchased in April 2013, so they will be taxed at the higher short-term capital gains tax rate.

Overall I'm happy with reducing my position in both Caterpillar and Intel.  I think in the long-term Intel might come back to haunt me because they can throw so much R&D towards whatever they want to get into that eventually they'll make progress.  But for now I was able to reduce my exposure to some of the more volatile sectors, industrial equipment and technology.  I wouldn't be opposed to adding more Intel in the future, but I want to see a lot more from them before I commit any more capital.  I'm kind of torn on what to do with the rest of my Caterpillar position but for now I'm going to take a wait and see approach.  Part of me wants to close the position and another parts wants to keep it open as they will still be around paying higher dividends for years to come.

Tomorrow I'll go over my what exactly I did with that new capital.  Yes, most of it has already been put to work.

I've updated my Portfolio page to reflect these changes.

8 comments:

  1. Your reasons for selling are sensible. I plan to continue holding INTC into 2014, where I want to see two things happen: (1) some improvement in earnings; and (2) a modest dividend increase, hopefully supported by earnings growth. If it looks like their newest products are not driving profits higher, then I will need to seriously reconsider my investment thesis. For the time being, though, I've decided to be patient and collect the dividends.

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    1. DGM,

      I'm still keeping a position with INTC and taking a wait and see approach with it. My biggest worry is that even if INTC does capture a large portion of the mobile/tablet market that their earnings will still suffer due to lower margins on the chips compared to the the PC sets. Over the medium term 3-5 years, I think there's a lot of tailwinds for a computer cycle upgrade at companies and that could lead to good operating results and buy them more time with mobile. You can't give me a tablet to do my work unless you can accept everything taking longer, and I'm sure that's pretty much across the board. Overall I felt it was prudent to trim a position that I'm not as bullish on in the long term but I still wanted some exposure to be able to wait it out.

      Liked the XOM purchase that you made.

      Thanks for stopping by!

      Delete
  2. Pursuit,

    Great minds think alike!

    http://www.dividendmantra.com/2013/09/recent-sale.html

    Best wishes!

    ReplyDelete
    Replies
    1. DM,

      When I saw your post go up I was curious if it was INTC because I know you're not all that fond of tech and they had just announced a 6th dividend at $0.225. And sure enough it was!

      Thanks for stopping by!

      Delete
  3. I do not have enough information about both stocks so I cannot judge whether it was a good move or bad move, but it was valuable reading your reasons and learning from it.

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    1. Martin,

      If you're not comfortable with a position then I think it's best to do something about it. So I trimmed both of them a little bit.

      Thanks for stopping by!

      Delete
  4. I'm not so sure your INTC sale will come back to haunt you. They've had negative EPS growth for several years now. Its no secret that mobile is where everything is going yet they cannot seem to get inroads into it. Either management couldn't accurately forecast where things were headed or they could not execute on their plans. For a tech company, where tech changes fast, that's lethal.
    Either way I don't want that in my portfolio.

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    Replies
    1. PMU,

      Tech is so risky for that very reason. I still want to take a wait and see approach here to see what happens but their spot in my portfolio is very tentative right now. We'll see what happens, but overall I was glad to take the proceeds from the sale of INTC and CAT and put it to work in BAX and JNJ.

      Thanks for stopping by!

      Delete