Jumping off the Stagecoach (SGC)

[SDN123]

As I have mentioned before I don't seem to be the best seller of shares, so I'm looking for some comments and/or advice...

In an extended moment of madness (while over-extending for yield) I bought two tranches of Stagecoach (SGC) at 206.8p (Nov-16) and then 214.54p (Jun-17) for an average total cost per share of 210.77p

On more sober reflection I've decided that I really don't like the business model and I wish that I'd never bought this company in the first place. I want to sell however psychologically I struggle to sell anything at a paper loss.

In total I've received 5 dividend payments from SGC for total 12.5% of the original purchase price; however the share price is well under water.

At the moment the price is ripping up , although I don't know why, and has reached the dizzy heights of 148.2p which, for me, represents an XIRR of -6.8% or a absolute (total return) loss of 17%.

I have some choices...

1. Never sell. Enjoy the ride. Enjoy the dividends.

2. Sell now, take the loss, buy something else that makes me more comfortable.

3. Wait for the current "boom" to peak and then sell, which may lead to a paper loss or a paper gain.

4. Wait for the price to rise to the point that I'm cost neutral and then sell. This could take a while (from months to many years to never.)

My preference is "3", eg wait for the current "irrational exuberance" to peter out, and then sell. However I have no idea how to judge that!

I'm sure that this is not an unusual situation for a HYPer...

Thoughts or advice?

Thanks in advance,

SDN

[idpickering]

As I have mentioned before I don't seem to be the best seller of shares, so I'm looking for some comments and/or advice...

In an extended moment of madness (while over-extending for yield) I bought two tranches of Stagecoach (SGC) at 206.8p (Nov-16) and then 214.54p (Jun-17) for an average total cost per share of 210.77p

On more sober reflection I've decided that I really don't like the business model and I wish that I'd never bought this company in the first place. I want to sell however psychologically I struggle to sell anything at a paper loss.

In total I've received 5 dividend payments from SGC for total 12.5% of the original purchase price; however the share price is well under water.

At the moment the price is ripping up , although I don't know why, and has reached the dizzy heights of 148.2p which, for me, represents an XIRR of -6.8% or a absolute (total return) loss of 17%.

I have some choices...

1. Never sell. Enjoy the ride. Enjoy the dividends.

2. Sell now, take the loss, buy something else that makes me more comfortable.

3. Wait for the current "boom" to peak and then sell, which may lead to a paper loss or a paper gain.

4. Wait for the price to rise to the point that I'm cost neutral and then sell. This could take a while (from months to many years to never.)

My preference is "3", eg wait for the current "irrational exuberance" to peter out, and then sell. However I have no idea how to judge that!

I'm sure that this is not an unusual situation for a HYPer...

Thoughts or advice?

Thanks in advance,

SDN

Hi SDN, my tactic is normally to ditch shares I’ve lost faith in, Be they in profit or not. I did this recently by dropping AV. At a 14% capital loss. I wasn’t comfortable with their dividend prospects either. You can’t tell the future of any share but I’d rather my dosh was invested in a share I had more faith in. So in short, imho, drop it, learn from it, and move on.

Ian.

[Itsallaguess]

I want to sell however psychologically I struggle to sell anything at a paper loss.

I found this hurdle a difficult one to get over too, but fundamentally I knew that it was important not to allow an investment, which I'd already decided that I simply did not want to be involved with, to be able to then lock me into it simply because the investment might be showing a 'technical loss' at a particular point in time.

You've said already that you 'really don't like the business model', and it's unclear if share-price action alone might be enough for you to change that view, but something tells me that won't be the case, so rather than put the sale off, which is only going to cause hassle whilst you maintain a watchful eye on an investment you wish you weren't involved with, I'd recommend simply selling and walking away...

I'm not a great seller of investments myself, but I found that clearing this particular mental-hurdle was really quite liberating when it involved shares that were causing me too much 'thinking time', and the fact that you've found cause to start this topic regarding Stagecoach is, in my view, enough of a red-light to suggest that this is a sale that you're unlikely to look back on with much sadness, if at all....

Ask yourself if any potential loss in cash terms is likely to visible in the overall scheme of things in 5 or 10 years time at a portfolio level.....

My advice?

Do it, and move on....

Cheers,

Itsallaguess

[OLTB]

I had the same unnerving feeling with United Utilities (UU.) and sold to re-invest into an IT (Merchants in my case).

There were a few concerns (re-nationalisation possibility, big director sales) and I simply wasn’t comfortable. Maybe it was just me.

Anywho - I sold when the holding value was just about up to purchase price and the estimated dividend for the reinvested capital was just above that of UU’s.

I feel happier

Cheers, OLTB.

[TUK020]

As I have mentioned before I don't seem to be the best seller of shares, so I'm looking for some comments and/or advice...

SDN,
After the Carillion debacle, I spent a lot of time thinking about what indicators there were about when to sell.

I concluded that there was no 'golden signal', but the best easily available pointer is the short selling market.
I arrived at a completely arbitrary figure of 5% - anything over this, I unloaded.
This probably caused me to miss out on Balfour Beatty's recovery, and maybe miss a couple of opportunities but helped me sleep better at night.

https://shorttracker.co.uk/companies/?sort=2&d=desc
Stagecoach are down on page 17, with only 0.9% of stock shorted by one institution.
This is well below such majors as Vodafone etc.

This probably indicates that you do not need to hurry a decision.
If you have lost faith in the business model, this would make the decision, but the timing could be flexible.

tuk020

[tjh290633]

I bought SGC in 1999 as a bit of a punt, alongside some more HYP-ish shares. It had a few traumas, Coach USA being one of them, but I sold out a few years later when the price had risen well. My records are not to hand at the moment, but my recollection is that they cut the dividend about 2009 and the price fell. Since then, the yield never got into HYP territory until recently, and I haven't felt the urge to go back in. In fact I have decided to avoid transport shares of all persuasions.

Once I have a share, I would not usually dispose of it unless it stopped paying dividends, or alternatively if the price rise so much that the yield fell below about half that of the market, just over 4% at the moment. As I recall, neither apply to SGC at this time.

Share prices go up and down, often for reasons not readily apparent to the lay observer. In my view, selling because the price has fallen is not a logical decision. Buying more at the lower price is the alternative option, provided that dividends remain healthy and are not under threat.

Others may take the opposite view, but that is mine.

TJH

[moorfield]

I have some choices...

1. Never sell. Enjoy the ride. Enjoy the dividends.

2. Sell now, take the loss, buy something else that makes me more comfortable.

3. Wait for the current "boom" to peak and then sell, which may lead to a paper loss or a paper gain.

4. Wait for the price to rise to the point that I'm cost neutral and then sell. This could take a while (from months to many years to never.)

My preference is "3", eg wait for the current "irrational exuberance" to peter out, and then sell. However I have no idea how to judge that!

I'm sure that this is not an unusual situation for a HYPer...

Thoughts or advice?

I find it helps to look at what the overall portfolio income is doing rather than fret about individual holdings - ten years ago I set out a schedule of target (rising) income each year until 2031 (provisional early retirement date); this year despite dividend cuts from CNA, SSE, VOD, a deferral from RE.B, and a nearly too good to be true yield from IMB, my portfolio income remains comfortably on target, so I am not persuaded to sell any of these yet, but neither am I topping them up.

Hold onto SGC if you are unsure of it, if your portfolio is doing what you need it to, and just keep topping up elsewhere.

[Dod101]

On more sober reflection I've decided that I really don't like the business model and I wish that I'd never bought this company in the first place. I want to sell however psychologically I struggle to sell anything at a paper loss.

I have some choices...

1. Never sell. Enjoy the ride. Enjoy the dividends.

2. Sell now, take the loss, buy something else that makes me more comfortable.

3. Wait for the current "boom" to peak and then sell, which may lead to a paper loss or a paper gain.

4. Wait for the price to rise to the point that I'm cost neutral and then sell. This could take a while (from months to many years to never.)

My preference is "3", eg wait for the current "irrational exuberance" to peter out, and then sell. However I have no idea how to judge that!

I think if intent on selling, 3. would be most people's choice, but you cannot know when the peak has arrived so I think you can ignore that. As you have acknowledged 4. may never happen so really you are down to 1. or 2. If you are truly decided that you want to sell then you are left with 2.

I know that you may miss out on a boom in Stagecoach's price but you need to ignore that and do not look back once you have sold. Takes a bit of courage and willpower at first but it will not be the last time in your investing career that this situation will arise and it gets easier. I firmly believe in getting out if you feel uncomfortable with a share. Just do it.

Dod

[kempiejon]

My default position with HYP picks is avoid selling. I do harvest capital gains from unsheltered accounts and move high income holdings into my ISA and SIPP to get below the dividend tax free allowance. I don't hold nor have I investigated Stagecoach other than to check its yield which is about 5%. HYP is primarily an income strategy and 5% is a good income. You seem concerned with price which I have gradually learnt I can usually ignore and concentrate on dividends, they vary much less and provided you have a enough shares in a portfolio individual holdings don't really sway the income by much. I'd move on and think about something else but as has been said you need to do what helps you sleep at night and that's not always going to be the most potentially profitable action, that's the cost for peace of mind.

[dealtn]

I'm not a HYPer, so have no allegiance to the "rules" or the psychology of breaking them.

However I do get the psychology of admitting, or crystalizing a "mistake". It is one of the hardest things to overcome, and despite many years of investing I can still be guilty of price-anchoring (especially against purchase price). BUT it's irrelevant and should be ignored (perhaps with the small exception of dealing with capital gains tax, and even that small tax "tail" shouldn't be wagging the portfolio "dog" in anything but a minor fashion).

It's the future that matters not the past, and given you have clearly lost the faith in this particular investment simply sell it, move on, and invest in another in which you do have faith. Only you (and your extremely disinterested broker, who is extremely likely to be a computer anyway) know what your purchase price was. If it's easier simply tell yourself you bought it at a much lower price and are booking a profit. If you're anyway human it won't be the first, nor last, time you have "fibbed" to yourself.

The outcome by delaying is building up future regrets about not selling when you had the chance. If it makes it easier promise never to look at the share price ever again.

I suspect, given it's a HYP, this share is only a small percentage of your portfolio so it really isn't worth spending mental energy on it, focus on the aggregate and move on.

[funduffer]

I too bought SGC in 2016 at £2 with the intention to diversify my HYP and with a forecast yield of 5.8%, it seemed like a good buy at the time.

Since then it has turned into a problem.

From the HYP point of view, there was a dividend cut of roughly a third in 2018, so it is no longer a HYP option for me at present. However, I buy into the LTBH philosophy of HYP simply because, like you, I am very poor at crystallising a paper loss.

On the business front, SGC have got out of the US, and their train business seems to be disappearing as they are no longer winning new rail franchises, and their old ones are finishing. Maybe it is a good thing as the rail industry looks like it is due for political change (Conservatives & Labour say this).

That leaves SGC as a UK bus company.

Note also, they have embarked on a share buy-back programme, which may explain some of the recent price rise:

https://www.investegate.co.uk/stagecoac ... 00045884O/

They have spent £28.5m out of £60m since April.

So I see your problem, but for me, they are still paying dividends, and yield more than 5%, so before selling, be clear what you would replace them with.

For me, I sit and wait to see what transpires.

FD

[SDN123]

Thanks to everyone who has contributed to this thread.

The rather boring answer is that, for now, I’ve decided to continue to sit on my hands and do nothing.

This is on the basis that:
- I’m still getting a decent yield;
- it’s not totally obvious where I would put the funds released;
- I want to investigate further into their business model and be sure that I’m working on facts and not feelings.

SDN

[JuanDB]

John Kingham, aka uk value investor, recently did a piece on Stagecoach. Well worth a read.

https://www.ukvalueinvestor.com/2019/08/stagecoach-investors-bumpy-ride.html/