Tuesday, October 20, 2015

Two Recent Sells: BCE Inc and Canadian Utilities

With the TSX up over 4% in October, I took advantage of the market upswing with two recent stock sales. Although my sale of BCE Inc (“BCE”) in my RRSP was something I previously planned and explained, my sale of my position in Canadian Utilities is undoubtedly more of a surprise.

After completing a full position of BCE in July in my non-registered account, I bided my time before selling the equivalent full position in my RRSP. Although I was fine being overweight this telecommunication heavyweight, I felt the time had come to part ways with my RRSP position as BCE’s share price climbed steadily over the last few months to the point where it has a P/E of almost 20X. The share price appreciation has drove the dividend yield down to about 4.5%, compared to the 4.9% yield on cost on my July purchase.

How could I sell my Canadian Utilities position while simultaneously having it on my watch list the last two months? As Canadian Utilities moved further above my target price over the last two months, I realized that although I think it’s an excellent company, due to its slow growth nature, I would be more comfortable re-initiating my position at a lower entry point. Since my previous Canadian Utilities position was inside my RRSP, I knew there would be no tax penalties if I re-bought the position at a lower price within a month. Like BCE, as Canadian Utilities’ P/E grew closer to 20X, and their dividend yield decreased to slightly over 3%, my perception of value declined accordingly.

With plenty of cash now sitting idle in my RRSP, I’ve been close to increasing my position on Alaris Royalty, as I continue to feel strongly that they represent an exceptional value at their current price. Nothing else on my watch list jumps at me at the moment, so I’ll do my best to remain patient until a juicy pitch comes along. My investment holdings page has been updated to reflect the two sales outlined above. 

Have you ever sold a stock with the hopes of re-initiating a position at a lower entry point? If so, were you successful?

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