I recently told you about the 4 investment mistakes I made in 2.014. All of them were due to the purchase of shares that should have been discarded for not passing the necessary quality criteria. In this article I would like to discuss the possibility that you have made a 5th mistake, this time by not selling shares that you could possibly have sold. I await your opinions.
When does a value investor sell?
A few months ago I published an article in which I explained the 5 reasons that tell us when we should sell shares. These reasons are as follows:
- Quote above its intrinsic value
- Existence of better investment opportunities
- Investment portfolio adjustments
- Increased risk in the company
- Personal needings
In the case that I am going to expose in this article, the error may have been not having sold shares whose price could be reflecting its intrinsic value. However, I'm not sure it was a mistake. The shares I am referring to are those of the Harley Davidson company.
Below I will explain the reasons why my final decision was to keep my investment in the company.
Why didn't I sell my Harley Davidson stock?
For 4 reasons.
In the first place, due to the tax legislation in Spain. I bought Harley Davidson shares a little less than 6 years ago at a price of $ 9,3 per share. Currently, the stock is trading at approximately $ 64 per share, which represents a latent capital gain of 590% in dollars. If we take into account the appreciation of the dollar against the euro, the profitability is higher than 700%. In the case of selling my shares, I would be obliged to pay a good amount to the Treasury for that capital gain. Specifically, between $ 11,5 and $ 14,75 per share. This is one of the reasons I decided not to sell.
Second, because it is a company with a great competitive advantage, its brand. In fact, the loyalty of his followers reaches the point that many of them have his logo tattooed on their bodies. Few companies in the world can boast of having such a loyal clientele.
Third, I believe that there are not many quality companies currently trading at a good price. It is possible that if there were good alternatives I would consider selling, but I did not find clear purchases in my circle of competition.
Lastly, there is a long-term trend that could greatly benefit Harley Davidson. This trend is the fact that millions of people from emerging countries are joining the middle classes. This will increase the potential clientele of the company considerably in the coming decades.
Was I wrong not to sell Harley Davidson?
I honestly believe that I have done the right thing and that my decision has been rational.
However, I may be wrong. My biggest concern is being influenced by the “halo effect”, Which is one of the most difficult cognitive biases to avoid.
I hope your opinions.