As most regular readers are aware, I have been liquidating some of my holdings lately. This has been driven by a few different reasons – driven by a combination of market conditions, complacency in the market, lack of belief in individual holdings, the yearn for simplicity provided by index funds etc. Some of these reasons have been summarized in this post. This post captures another recent sell in my portfolio.
As the market continues to hover around all time highs, I have been thinking more about investor psychology and introspecting my own mentality. Recently I posted an article entitled “Do You Love Your Investment Holdings?” detailing how investors can fall in love with a holding and try to justify it even when the evidence points to investors to come to different conclusions instead. This can be driven by familiarity and a bias that comes with ownership of shares in a company for a prolonged period of time. This is a common pitfall that investors fall for and I came to the conclusion that I was facing the same issue with this holding. While this particular company is one that I didn’t quite love, I have noticed that most investors in the community seem to love it thanks for the dividends.
I decided to sell 60 shares in Realty Income Corp (O) @ $66.95 and close my position.
Recent Sell Decision
- The capital gains were too good to ignore. This has been the main driving force for me to sell and book my profits. I was sitting on close to 100% in unrealized gains. The decision came down to one simple question: Do I hold this stock and wait 15 years for that amount of dividends to accumulate or take the profits now. The answer was a resounding “Book Profits Now!”
- Realty Income is still a very well run company — and investors are more than happy to pay the premium in this yield hungry world for the stock.
- The stock is very overpriced (about 30-40% depending on your model) and new investments cannot be justified. However, the company still see some tailwinds as GICS creates a new REIT sector — which will eventually spawn ETF rebalancing and launch of new funds; and most funds are bound to include Realty Income as one of the top holdings.
- Other than that, I have nothing negative to share about this company. I may look at this company again in the future when better valuations present themselves.
Overall gain (including dividends during holding period of approx 2.5 years): 98%
Full Disclosure: Our full list of holdings are available here.