Consequently, this is the first article where I will highlight the details of my decision to sell. In fact, my decision to sell two companies. Two great dividend paying companies at that.
A little explanation to my recent decision - In an effort to build the necessary capital to fund my day trading aspirations, I have chosen to sell the following two companies:
AT&T (T): After the failed merger with T-mobile, I recognized that though this company pays a hefty dividend, it’s growth potential was limited (or ‘slow’ may be a better description), and as a result, my small position in this company could ultimately be more profitable used elsewhere: in my “day trading pot” to be exact.
Do not get me wrong; I think T is an excellent dividend company that has the potential to make any patient investor seeking consistent dividend income happy. Nevertheless, I chose to sell the 3% of my portfolio that T made up.
Southern Company (SO): It pains me to sell this company. For numerous reasons I have loved (and profited) from my purchase of SO. SO was my only utility, purchased way back in January 2010 at $33 a share. It was part of my coveted ‘original six’ that I have referenced numerous times on my site. Despite my attachment for this stock, however, I believe the timing is right for this sale. I also believe my available funds will be better used elsewhere: again, in my “day trading pot”.
I ended up selling SO for a large gain; at its 52 week high to be exact - a point at which many think it is overvalued. I tend to agree, and thought it was a good time to exit. Like AT&T, Southern Company pays a large dividend, but was only a modest portion of my portfolio at 7%.
In conclusion: two sales of two solid dividend paying companies. The question now remains - Did I make the right move?
Time will tell I guess, but I am optimistic. It would be unwise to sell these securities for the purpose of an ‘extravagant vacation’, or a 80” TV (yes, they actually sell those now). However, reallocating these funds as another growing piece of my investment strategy I hope will be a wise choice.
I'd greatly appreciate your thoughts on this decision. And, on my plan to enter the day trading game if you have time. This definitely is new territory for me. Thanks!
Ps, expect to see more “Recent Sell” articles in the near future…..
DividendPartisan
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Hi DP,
ReplyDeleteJust wondering, what type of strategy are you applying to your day trading? Is it common stock buying/sell, option spreads, shorting stocks, etc.
I use credit/debit option spreads on my paper trading. It's pretty fun. But you can never correctly predict the direction the markets. Just make sure you don't use margins.
Best of luck on your day trading! Hope you still blog about dividend interesting. Cheers! =)
Henry,
ReplyDeleteI've just started...and am still transfering some funds, etc. but I have only done a few common stock 'trend trading'. I am trying to break into the covered calls game as well. Shorting will hopefully be developed in the near term, but that is still a bit off.
And don't worry, I am definitely still a dividend investor! Thanks for the comment!
DivPartisan
Personally, I would have kept T and sold ABT instead. But I have thought of selling some of my T myself. I already sold ABT a few weeks ago. I still think it is a good stock, but I want to free up funds for other stock purchases.
ReplyDeletePartisan,
ReplyDeleteWhile you're selling, I'm buying. I put about $5k to work for me over the last couple days, buying shares with three companies.
I will say, I did sell one holding of mine but simply because I didn't agree with the fundamentals of the business and not to free up funds or get into a different strategy.
I may just have purchased one of your sold stocks today!
Best of luck on your strategy.
remember I told you to learn to use your 15min chart to day trade. I can explain if you want.
ReplyDeleteTom
Mantra,
ReplyDeleteCongrats on the purchases! My day trading plan is in effect, and I'm looking forward to the outcome.
Hope all is well brother. Keep in touch,
DivPartisan
Tom,
ReplyDeleteI'd love an explanation on the 15 minute chart, if you don't mind. That'd be great!
DivPartisan
T's movements have been very erratic over the past year. It underperformed the market the past 23 months, and basically matched the market the past 11. So if just counting the dividends, it's done well enough. I sorta regret selling last year, but I was pocketing profits. However, and this flip side is particularly important when you trade more frequently, the next place one puts the money is just as important. My followups haven't done as well... :-(
ReplyDeleteRobber Baron,
ReplyDeleteGood to hear from you again. I tend to agree, and think that we'll not see much capital appreciation from T in the near term.
And, I couldn't agree more that the 'next investment' is ultimately just as important, if not more so than the first. Take care,
DividendPartisan
Very sorry to see this change of direction. I wish you well and good luck.
ReplyDeleteHopefully if it doesn't work out which seems likely, based on the amount of time you'll have to learn and not knowing the reason behind the comment on the 15 minute chart, you'll come out ok.
Again, best of luck.
Anonymous,
ReplyDeleteKind of a harsh comment. It could work out very nicely. Isn't that also a possibility?
DP
Nothing wrong with trying new strategies. I have no idea how old you are, but you are probably young enough and smart enough to recover if it fails...and there is always the chance it will work out, after all, day traders have been around awhile, some of them must be making money lol
ReplyDeleteDP,
ReplyDeleteDay trading can work if your very disciplined. You need to practice good cash management and don't get emotional. I day traded back in the dot-com heyday and had a blast. Learn your charting and all your setups. I read a lot of books on the subject before I got started and it helped tremendously. I plan on doing some day trading in 2012 as well. Good luck...
DPS