Why I Sold Four Positions for Short-Term Gains.
When do you have a profit from an investment? You might look at your statement and think you have profits because your investments are currently worth more than you paid for them. However, like any business, an investment is only worth what someone will pay for it on the day you want to sell it. Here are some reasons and examples for why I sold my MGA, OTTR, and PH shares.
Magna International Inc.
Yesterday I sold all my shares in MGA (Magna International Inc.) because they were up 16.6% since I bought them on February 3. This was a profit of $626 in about one month. To put this in perspective, if I were to wait a year for four quarterly dividend payments, I would receive $86 in total for my 50 shares. In addition, there is no guarantee that I could sell my MGA shares a year from now for the same amount. The cash can now be put to work elsewhere in my ROTH IRA.
Parker-Hannifin Corporation
The story on PH is even better. I have a subscription to “Profits Unlimited” and one of the stocks the author recommended was PH. The author recommended buying PH shares in January 2020. His buy price suggestion was to look at the stock and pick a price you thought was a good one. I did nothing. The price at the time was around $200 per share. On August 3, the price was $181.50 per share, so I purchased 50 shares for a total investment of $9,075. Yesterday I sold my 50 shares for a 63.6% profit of $5,775. In about seven months I made a significant profit. In addition, I received three dividends of $44 each while I waited. Today, “Profits Unlimited” said it was time to sell. I agreed and locked in my profit.
Otter Tail Corporation
OTTR is another success story. I bought shares for my ROTH IRA and for my traditional IRA. These shares were purchased in late January and early February of this year. In total, I owned 200 shares. My profit from holding these shares for about a month is $625. That is a 7.7% profit in one month. The best I could hope for in dividends was about half that amount in twelve months.
Total Profit from Sales
The total profit from these four positions was $7,158. If I had waited a year, I probably would have collected about $750 in dividends. As you can see, my short-term profits were just too attractive to wait for the dividends.
Where to Invest Now? Merck and Coca-Cola
Today I took a small sliver of the proceeds from those four sales and bought some more shares of MRK and KO. MRK’s and KO’s Ex-dividend dates are both this Friday. So I will receive a bit more of a dividend from these purchases than I otherwise would have received if I continued to hold MGA, PH, and OTTR.
Final Thoughts
If you buy and hold ETF’s or mutual funds, I do not suggest using the strategy I used for these stocks. You should think long-term. You would only want to look at your stock positions and do the math. If you have the cash from a sale, you should also give some thought to where you might invest that cash.
Know Your Flocks & Herds 