Monday, June 9, 2014

Recent Sell - SO, VXUS

I have sold two positions in my holdings - The Southern Company (SO) and Vanguard Total International Stock ETF (VXUS). Regular readers of this blog are probably familiar with our recent purchase of a house. In order to cover the down payment, the plan has always been to sell some of my stock/fund investments. Last month, I sold my positions in mutual funds, but that does not cover all of our needs, so I have sold and closed my positions in SO and VXUS.

Why these positions?
I want to hold onto my dividend growers and sell my positions in funds and high income non-dividend growing stocks. 

Although a dividend grower, I decided to sell my position in The Southern Company (SO) as I see a lot of headwinds in the utilities sector. I will be posting details on that in a separate blog post later this week. Moreover, my average cost basis on the stock is just below the current price even after the gains this year -so, my YOC is pretty close to current yield; SO also doesnt have the best dividend growth rate record in my portfolio, which currently stands at 3.82% for the 5-yr dividend growth rate.

The ETF VXUS has seen quiet a bit of run up and has hit all-time highs as the ECB decided to take its rates negative (a big part of the fund composition is in European stocks). I sold the position while it was at an all-time high. We might re-instantiate a position in VXUS in the future when we move my wife's portfolio from mutual funds to ETFs. See the Goals page for details.

I have updated my Holdings page. See my current list of holdings here.


6 comments:

  1. R2R,

    I think you made a good decision with SO. I really like high yielders, but a utility with a high multiple and a sub 5% yield sounds way overpriced. At 6% I may start nibbling at it.

    MDP

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    1. I sure hope so, MDP. The P/E at 20 is really high for a utility company like SO. Time will tell if I made a good call

      Thanks stopping by and the comment
      R2R

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  2. I think you made a good move R2R. Not only did you raise some much needed capital for your home purchase, but you also sold an asset I view as overvalued. When interest rates rise.....and at some point they will......the pain won't be limited to bond markets. Bond proxies such as utilities and REITs will also be hurt. There aren't many screaming buys in the equity markets, but in my opinion nothing is as expensive as bonds and bond proxies.
    Congratulations again on the house buddy
    -Bryan

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    1. Thanks Bryan. Yeah utilities will suffer when the interest rate rises.
      The selling of VXUS was based on the fact that it trades on the US exchange. Since I started buying and holding index funds, Vanguard Canada has launched funds that are more friendly for us (albeit with a bit more higher MER) - traded on the TSX market and in CAD$. We will probably be using those vehicles instead of VXUS, where the currency conversion causes me to lose on some of my capital.

      Thanks again buddy :)
      R2R

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  3. Hi Sabeel,

    I'll keep my shares of SO.

    And I want to buy two more utilities:
    a) Consolidated Edison
    b) Nextera Energy

    This is my list of companies, which I want to buy in the next 2-3 years:
    http://www.comdirect.de/inf/musterdepot/pmd/freunde.html?portfolio_key=1106891680254582222199553474388202402447678023106151410372492214901662545545545

    Best whishes :-)
    Michael

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    1. Some very strong companies in that list, Michael. I would love to own some of them. Like I said, there are multiple reasons for me to sell SO and I decided on it based on my current personal situation. In the long run, Im sure things will even out and its a good long term hold.

      regards
      sabeel

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