Summer pruning

Apologies for the lack of content of late, but it really shouldn’t be much of a surprise.

The whole point of investing the way I do is to avoid, as much as possible, having to be in front of the keyboard. “The Summer of Lou” is in full-swing. The Orioles are finally after years of neglect back to providing a fun distraction. Atlanta has been surprisingly not humid for June. The summer transfer window is about to open in Europe and gossip abounds.

Why on Earth would anyone want to spend their time looking at stocks?

I’ve spent a lot of time of late working to save an old red oak tree on our property. Red oaks, I’ve learned, tend not to be as hardy as others around us. This one has some big dead branches about halfway up the tree, and areas towards the edges of the canopy where leaves are not growing on the twigs.

Part of the issue is the roots, and what nutrients are available to the tree on a hill patch with mostly clay soil where organic material tends to wash away. But the tree is also expending far too much energy trying to deal with its minor weaknesses. 🚨There is a metaphor there somewhere. 🚨

Anyway, despite my reluctance to sit in front of a screen, life-long learning never halts (or so I am told). And, to be honest, investing is never too far from my mind.

Perhaps on brand, and perhaps having something to do with my general uneasiness about valuations right now, I’ve been thinking a lot about when to sell.

As we’ve discussed, I hate selling stocks. The whole idea is to find companies you can hold for a lifetime without worrying, and pay as little attention to them as possible. But I do sell. For lots of reasons.

• Sometimes, I was simply wrong. It happens. And when you are wrong you are better off admitting it, taking the loss, and moving on.

• Sometimes, especially during the winter months, I do like to play cycles. I grew up on old-school industrials and like to think I have some idea of timing certain ups and downs. I’m not as good as it as I think I am. But I still do it.

• Sometimes, good companies get sold.

• Occasionally, there are compliance issues of sorts.

I’m not much of a journal person. (This newsletter is sort of my attempt to slow down and record some of my thoughts.) But I am a data geek who tracks everything. And I see great value in going back sometimes and looking at what I have sold, and whether that was a good move or a bad move. Especially in times like this where, at least to my eyes, it might be wise to “take gains.” That’s something I am not good at but trying to think about more.

So today we are going to fire up the Koyfin spreadsheets, take a look at what I have sold over the years, and learn what we can. I’m not going to provide individual commentary on why I sold most of these. They are in the past. And this should not be taken as an indication I would sell all of these today if I still owned them. Please listen to your own brain, and not some moron with a newsletter. At least not this moron with a newsletter.

If you do have any questions about these, feel free to drop me a line via Twitter or by email at lou.whiteman (at) live (dot) com. No promises, but I was told I should do another AMA soon so ask about whatever you want.

And now a brief (paid) endorsement:

To the extent that this content is intelligent, it is so because I use tools like Koyfin to make sure I have the best charts, data, analysis, and transcripts available. Koyfin provides a lot of the same tools you get with a Bloomberg terminal or Capital IQ at a fraction of the price.

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The sells, in (somewhat?) chronological order, going back to 2019 (?). The table includes company name, gain/loss at time of sale, what the stock has done since the sale (the stars indicate I was cashed out by a sale).

Some thoughts…

• Sometimes, playing the cycle works. FedEx, Ford, and Phillips spring to mind. As does USA Truck, which worked out about as well as possible.

• But sometimes it doesn’t. I walked away way too early from ATI. I have reasons and it made sense when I did it but… that was a mistake.

• There is some benefit in admitting you are wrong early. Seritage, 2U, Republic First. Blackline didn’t feel wrong, but I was a tourist there. No regrets.

• Yes, I took cash in the Oaktree deal. Probably a mistake but I owned a lot of Brookfield already.

• Ignore Teladoc. That was pure luck. Sold at the top, basically, based on a compliance thing.

• I stand by selling Uxin. Percentages are weird on penny stocks, and the fees for foreign listings on this one were annoying. I don’t even remember owning Axos Financial.

• I should never mess with semiconductors.

But the real takeaway is: I should sell more. For the most part, by in large, caveats/caveats, selling has done my portfolio no harm. If anything, I’m richer for it. Believe it or not, I do have winners in my portfolio. Some of those winners came out of, or were added to, thanks to those sales.

I’m not going active. The “Summer of Lou” is still in place. But I need to rethink my stubbornness around selling.

I currently own 91 different individual stocks. It is time to actually expend the energy to look at them. Not sure when, and not sure exactly how. I think I might screen based on where they are relatively to their 52-week or 3-year range and start from there. And then really take the time to think about where I see these businesses going in the next 3 to 5 years. You know… work.

I still think the best path forward is to find stocks worth holding forever and hold them for that time period. Or longer. And take a lot of time off. That’s still the plan. But no plan is infallible.

Done selectively, pruning can make the tree grow stronger.

Disclaimer: Fits and Starts DOES NOT provide financial advice. All content is for informational purposes only. Stocks mentioned are as reference only, and a mention should not be interpreted as a buy or sell recommendation. The author is not a registered advisor or a broker/dealer. DO YOUR OWN HOMEWORK. The information contained within is not and should not be construed as investment advice, and does not purport to be. The red zone has always been for loading and unloading of passengers. There’s never stopping in a white zone.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.