A Good Problem to Have

[TomK]

I bought some WAG back in December for less than $35 a share. I had read a lot about it and believed it to be undervalued and a great entry point for an excellent dividend growth stock. But, like all my holdings, I purchase with the idea that I'll be holding for years or decades, if not forever. I figured the price would catch up eventually.

But now it is only months later and the price is over $47 per share. That's a 35% return in just a few months! On the one hand, I should of course just stick with the plan and pat myself on the back for picking what so far appears to be a good entry point for a nice income stream that I'll enjoy for years.

On the other hand, I'm sorely tempted to take the money and run. Or rather, take the money and put it into another DG stock that is more undervalued than WAG is now.

Like a said, a good problem to have!

-- TomK

[bobbyboy1970]

Yeah, my heart really goes out to you there, buddy.

[Kerim]

I guess the answer, as always is, it depends. I certainly think that if you have the time and energy to monitor your portfolio very closely and have the interest and ability and discipline to trade your DG portfolio (rotating those that get ahead into the ones that have fallen behind, from a valuation perspective), you could add some performance over time. If I were ever to do that, though, I would draw bright lines around the strategy, only selling when the stock is obviously very overvalued and where I had something obviously undervalued to move the money into.

Personally, I do not have the time, energy, or stomach for that sort of action. Strictly buy and hold unless company falters or something changes. Maybe in the future when I am more experienced and have more time to focus on investments I'll explore that route.

To your specific dilemma, although you have had a great run, I'm not sure WAG is overvalued at this point. So I say you hang on to it for the time being. Stick with the plan, which was to buy for (growing) income and hold.

[Trevor]

I love having similar problems lol. Anything in life that makes you feel like you dont know what to do with your money, it means you are doing good.

[KeithD]

When to buy and sell must be answered before any money is traded. If you decide on long term investments than you buy when you think the time is right and leave it alone until you reach the point you previously decided to pull out all your investments.

On the other hand if you had decided you are an in and out trader, and you have hit the profit margin you set prior to investing (or your Stop/Loss) then sell.

If you didn't have the answer to those questions, which you obviously didn't, before investing then make sure you do next time.

[TomK]

(03-27-2013, 04:51 PM)Kerim Wrote: So I say you hang on to it for the time being. Stick with the plan, which was to buy for (growing) income and hold.

I think that is the right answer. I was just thinking that I would probably not buy it at this level. Not that it is overvalued, but the yield today is below what I like to get on entry. But my yield on cost is still just fine.

(03-27-2013, 11:14 PM)Trevor Wrote: I love having similar problems lol. Anything in life that makes you feel like you dont know what to do with your money, it means you are doing good.

Yeah, if you ever hear me complaining that I just can't figure out what to do with all of my stacks of cash, you are invited to give me a smack. Like I said, it is a good problem to have!

(03-28-2013, 03:58 AM)KeithD Wrote: If you didn't have the answer to those questions, which you obviously didn't, before investing then make sure you do next time.

Well, I did have the answers to these questions, but the stock gave me a reason to doubt myself! But like I said, I'm gonna stick with the plan. Long WAG!

[Horace Cugle]

Well here it is 3 months later, aren't you glad you hung onto WAG?

Nice 14.5% dividend increase and a long term shot at owning the world's drug store.

You could sell it and buy a 4.5% yield utility but WAG has a lot more going for it than that.

Think about it..... you could sell WAG and buy SO, and what do you get? 2% more yield, $100 a year more income on a $5k investment.

Now if you're retired I can see making that trade because income is the focus, if you're not retired or dependent on the income, I just can't see it.

I own a significant position in WAG so I'm not just talking out of my hat either. I really like this company and where they're headed. There will be some stumbles along the way just like any company would have implementing new business plans, mergers, etc but think this is one you really want to stick with.

[TomK]

Can I plead temporary insanity on this one? In hindsight, I'd like to think I was never really close to selling. I really do believe in choosing the best stocks, buying them at the right price, and holding them for a long long time, unless the company gives you a blatant reason to sell.

Nonetheless, I do think it an interesting phenomenon when you buy something that you believe to be undervalued, with the expectation that over the coming years it will go up by 30 or 50 percent, and then it proceeds to do so over a matter of months. Really, as dividend growth investors we should be frustrated by an experience like this because it would have been preferable to enjoy a longer period of under-valuation during which we could have accumulated more shares.

Really, it is quite a bit harder to find obviously undervalued DG stocks right now that it was even 6 months ago.

[Kerim]

(07-18-2013, 08:36 AM)TomK Wrote: Really, it is quite a bit harder to find obviously undervalued DG stocks right now that it was even 6 months ago.

I agree with you completely about that -- I don't think I appreciated how easy we had it a year or two ago! I'm very fortunate that the "hyper-inflationary" days of my dividend growth portfolio were in the 2008 to 2012 period. This was when I was establishing the foundation of my portfolio, moving funds from cash and index funds into dividend growth stocks. I was making purchases of good size (for me, anyway) pretty frequently. That is mostly over now, and these days I am just trickling in new money as it becomes available. If I had a lot of cash to deploy into DG stocks right now, I think I'd be a little more anxious. As it is, it is not usually too hard to find something to put a few dollars into every couple of months, but you are right -- these are NOT the easy bargains days we enjoyed recently.