For more than a decade, I’ve been a lucky stock picker.
For the most part, I’ve avoided mistakes and I’ve operated like a dumpster diver, looking for the fresh loaves of bread that the bakery boy accidentally threw out. I have bought—what I deemed to be—great businesses at fair, or cheap prices.
I’ve crushed the market indexes…crushed them. And in case you’re thinking me boastful and find me thoroughly unlikable, let me tell you what I think: I’ve been lucky…for a long time.
Even in March of 2009, when I decided to throw a tiny amount of money at AIG, it panned out and I gained 350%. In dollar terms, I’ve profited more than $130,000 in Berkshire Hathaway stock alone.
It’s a profit that I’ll realize when the markets open tomorrow morning.
In 2010, I made 23%, beating the U.S. and world indexes thoroughly, despite having a healthy bond component.
But I haven’t been lucky for a long time, in stock market terms. A decade is a blip. It means nothing. So I’m selling all of my individual stocks, amounting to more than $700,000 worth. It’s a non taxable account.
Below, you can see my pending sell orders.
|
Symbol |
Security Name |
Qty |
|
RY |
ROYAL BANK OF CANADA |
1,12o |
|
WMT |
WAL MART STORES INC |
20 |
|
TJX |
TJX COMPANIES INC |
200 |
|
SSD |
SIMPSON MANF INC |
331 |
|
PFE |
PFIZER INC |
2,355 |
|
KO |
COCA COLA CO |
1,615 |
|
JNJ |
JOHNSON & JOHNSON |
900 |
|
AIG |
AMERICAN INTL GROUP- |
70 |
|
MSFT |
MICROSOFT CORP |
600 |
|
FAST |
FASTENAL CO |
300 |
|
BRK.B |
BERKSHIRE HATHAWAY-B |
4,500 |
Only two of these stocks will be sold at levels close to my purchase prices: Microsoft, which has gained roughly 8% since my purchase, and The Royal Bank of Canada, which currently sells at a price similar to what I paid.
The rest of them are up….a lot. Even my Pfizer shares are up roughly 35%, including dividends.
But why am I selling? I’ll give you a hint:
I also placed $700,000 worth of purchase orders today.
What do you think I did, and why did I do it?
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50 comments
The Passive Income Earner says:
January 21, 2011 at 6:25 am (UTC 8 )
I’ll take a guess … You bought index shares. Why? Harry is buying these companies so you are running …
BadCaleb says:
January 21, 2011 at 6:57 am (UTC 8 )
I thought you just recently decided to swap your XDV money with stocks in that ETF starting with RY to avoid the fees. Of course, your reasons are your own but I’d be curious why the change from a little over a month ago?
Financial Uproar says:
January 21, 2011 at 7:54 am (UTC 8 )
Oooh! Guessing contests are fun. If I win, can I have a copy of your new book?
My gut is to guess what passive income earner did- index funds. But that’s no fun, so I’m going to say bonds. Lots and lots of fixed income. After all, you are getting old…
Marco says:
January 21, 2011 at 7:55 am (UTC 8 )
Hi Andrew,
I’m thinking a reallocation to ETFs… If so, why not keep some of the individual stocks for the dividend growth? You will receive a steady income from the portfolio without incurring any ETF fees and in the long run (I’m talking years, you know, perpetuity-like) you may be better off. Of course, I fully understand if the move is towards an ETF allocation, it’s much easier managing an ETF portfolio versus a single-stock portfolio especially when some of the large index ETF’s have cheap fees.
Perhaps you’re not even buying equities, perhaps a villa or two in Thailand and/or Laos instead???
Marco
The Biz of Life says:
January 21, 2011 at 10:14 am (UTC 8 )
To buy $700K worth of lottery tickets?
Andrew Hallam says:
January 21, 2011 at 10:18 am (UTC 8 )
@The Passive Income Earner
Hey Passive,
I am using the money to add to my low cost indexes. As for Harry, he’s an indexing brother. You might have been thinking of the cowboy investor I once alluded to in a post. He’s a fad follower. What he buys, we’d all better sell! What Harry has the right idea.
Andrew Hallam says:
January 21, 2011 at 10:20 am (UTC 8 )
@BadCaleb
Hey BadCaleb,
That was just one very expensive index (XDV on the Toronto Stock Exchange) It charged 0.55% annually so owning it didn’t make any sense. Getting charged 0.07% (as with my U.S. total stock market index) is more like it.
Andrew Hallam says:
January 21, 2011 at 10:22 am (UTC 8 )
@Financial Uproar
Hey Uproar,
You guess it too! As for age, don’t let the bald head fool you. I’m only 40 years young. My bond allocation is 40%. I’ve always ensured that it has more or less equalled my age.
Andrew Hallam says:
January 21, 2011 at 10:24 am (UTC 8 )
@Marco
Hey Marco,
No villa in Thailand. I could always wake up one day and find out that I don’t really own it. Wouldn’t that be a drag? It happens!
Andrew Hallam says:
January 21, 2011 at 10:25 am (UTC 8 )
@The Biz of Life
Hey Biz,
Lottery tickets? That’s the foolish man’s tax! But I’d imagine someone, somewhere, somehow has done that very thing.
The Passive Income Earner says:
January 21, 2011 at 10:59 am (UTC 8 )
@Andrew Hallam
You are right. I was alluding to one of your old post … Sorry Harry!
youngandthrifty says:
January 21, 2011 at 11:01 am (UTC 8 )
Hmmm… let me guess. Because the world is ending in 2012?
Because the market is due for a correction? That’s excellent that this is in a non-taxable account! I could just wince at the possible capital gains on that.
I thought you were of the Buy and Hold mentality, no?
larry macdonald says:
January 21, 2011 at 11:17 am (UTC 8 )
Andrew
I could see you doing it because you don’t want to spend the time and energy selecting stocks anymore. Maybe you are looking forward to doing other things with your time.
Money Smarts Blog says:
January 21, 2011 at 11:30 am (UTC 8 )
Now this is fun!
Mmm…I was thinking of indexing. Can’t guess the same as everyone else though.
How about – you are crystalizing the capital gains, since it’s probably not taxable in Singapore. You are doing this now, before you move back to North America.
TS says:
January 21, 2011 at 12:04 pm (UTC 8 )
To clarify, you are making this change because you don’t think you can beat the index over the long haul?
Andrew Hallam says:
January 21, 2011 at 1:03 pm (UTC 8 )
@TS
Hey TS,
That’s absolutely correct. I’ve always had indexes as well as individual stocks, but statistically speaking, the odds of anyone beating a diversified basket of indexes over an investment lifetime are very low. People will do it, of course, but the odds are long–especially when weighing in “investor’s behavior” which (studies show) ensures that most people underperform the products they own by dancing around: buying more when they rise in value, less when they fall in value etc. This was a tough decision to make, emotionally. I felt like I was Buffett, creating my canvas of super individual stocks. But success blurs the distinction between what’s “skill” and what’s “luck”. And I know that I’ll be in the 95th percentile, if I’m discliplined, with a portoflio of diversified indexes. Many investors will think they will beat my diversified account of indexes over a 30+ year period. But the vast majority of them will be wrong.
Andrew Hallam says:
January 21, 2011 at 3:12 pm (UTC 8 )
@youngandthrifty
Hey Young,
I’m definitely a buy and holder. My money is currently in the markets—just in a different form: 40% bond index, 60% low cost stock indexes. I already owned indexes; I just added this individual stock money to the indexes I currently have. Now I’m 100% indexed with no individual stocks.
Andrew Hallam says:
January 21, 2011 at 3:15 pm (UTC 8 )
@larry macdonald
You’re right Larry. But I’m also looking at the statistical realities as well. The odds are high that I won’t beat a diversified “couch potato” kind of portfolio over my investment lifetime. Over 10 years? I’ve done that. But over 30 more years, not likely. I get the feeling your personal money is diversified among indexes as well. True?
Andrew Hallam says:
January 21, 2011 at 3:17 pm (UTC 8 )
@Money Smarts Blog
Hey MoneySmarts,
That would have been a good reason to liquidate. But….I like SE Asia too much to leave. The weather is super!
Mich @BTI says:
January 21, 2011 at 7:34 pm (UTC 8 )
Bald move Andrew. Did it take a lot of back and forth with yourself before getting those sell orders in? After all, these are great companies with dividends and you have a 10 year history with some of them
In which ETFs will the money be distributed?
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