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My New Rule For Selling Stocks...
Published about 2 months ago • 4 min read
Here's your weekly helping of interesting investing information and insights.
Opinion
So the Canadian banks raised their dividends again this week. Big surprise. Toronto-Dominion Bank (TD) has been paying dividends every single year since 1857... Even Abraham Lincoln was still alive.
Let's talk about that — because TD taught a really important lesson about reactive selling that's going to shape how positions get managed going forward.
On August 21st, 2024, scary headlines hit. TD was setting aside $2.6 billion for money laundering fines and selling off part of their Schwab stake. That was enough to spook me, and 157 shares got dumped at $59.75 for about $9,381.
Reuters.com
That money went straight into Realty Income (O), VICI Properties (VICI), and Agree Realty (ADC). Three solid REITs. Can't go wrong, right?
Those have basically gone... nowhere.
TD almost doubled!
At the time of the sale, the position was basically break-even. No money was actually lost. But nearly 50% in upside got left on the table. And just one year later, TD was already 28% higher, with most of the bad news already in the rearview mirror.
DividendChannel.com
So what's the new rule going forward? Wait 365 days before selling anything. Just force yourself to sit on your hands and let more data come in before making a decision.
And here's exactly why that matters. Just 50 days after that sale, Simply Safe Dividends reaffirmed their "Safe" score on TD and basically said — hey, this bank looks cheap compared to its Canadian peers right now, and the business isn't permanently broken.
SimplySafeDividends.com
That one piece of information alone would have likely changed my thought process.
This whole TD story was actually part of a recent video covering ten selling mistakes — positions that all went significantly higher after being sold. It's a pattern, and it's very human, and good friend Ryne Williams gets it — he's made the same reactive sells that, with just a little more patience, would've played out completely differently.
Ryne reminded me about how Ian "PPCIAN" Lopuch basically never sells. Diamond hands, dividend style. It makes total sense! If the goal is buying great businesses for the long haul, the default answer to "should I sell?" should probably just be... no.
There ARE valid reasons to sell — like if the business is genuinely and permanently broken, not just temporarily in the news. Or if an absolutely rare fat pitch opportunity shows up. Even then though, the better move is usually to find fresh cash on the sidelines rather than sell something already working, even if it's going nowhere.
Because here's something Mohnish Pabrai likes to remind us — the mistress always looks hotter than the wife. Meaning, the new stock almost always looks more attractive than the one already owned.
The stocks already in the portfolio are familiar. Every flaw is visible. But that "sexy" new thing over there? The flaws probably haven't been discovered yet. The grass is almost never greener on the other side.
TD was the trusted long-term holding. But temporary blemishes made those REITs look much sexier. And we all know how that turned out.
Do you have any guardrails built in for when the urge to sell hits? If it's news-driven, do you sit and wait for more data? Or do you sell the moment your original reason for buying feels broken? Hit reply and let me know — would genuinely love to hear how you handle it.
Newsletter reader Steve shared this one from Wide Moat Research and their coverage of fallen angels stocks, which ones they're buying and ones to avoid... like Nike (NKE).
Tracey Ryniec had a fun breakdown of Berkshire-Hathaway (BRK.B) losing it's "cult" status and all their latest moves, including a whole mess of fully exiting positions! You can also check out those moves HERE.
Disclaimer: This is not investment advice. Do your own research before making any investment decisions.
😁THANK YOU to all who responded to the last newsletter!!
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