A Victim of my own Success: Snoopy sells down - again!
Quote:
Originally Posted by
Baa_Baa
SCT has had a boomer past 12-18 months after a sustained bad patch since Feb 2013. Might be a bit toppy now though.
Sold some more of my shares today at $2.60. The problem was I have been 'too successful' and SCT became my third biggest NZX holding and worth a ridiculous amont in dollar terms (given the typically low trading volumes). Given this normally difficult liquidity (although there has been much buying interest in recent days), I have decided to 'sell into strength' and, in the process, reduce my average SCT holding price to just 33c. This makes SCT near enough to an 'eight bagger' for me in just capital terms at today's $2.60 closing price. Add in the dividends over the years and my returns are significantly greater than that. I am now back to holding the same number of shares I did nine years ago, so even though pleasing, the exercise was hardly an overnight success.
So how did I do it? Not with buy and hold. My main method was to support all the capital raisings at depressed prices (and then some) over the years. Then when the share price recovered and the dividend yields correspondingly reduced I sold down back to the level I had before the capital raising. I repeated that exercise two or three times. I have never been out of SCT completely in nearly twenty years (for the first ten years my holding was quite small) and have recovered from an early position where on paper I had lost half my capital. Coming back from that, for SCT to be - I think - my biggest NZX success (in percentage terms) is very satisfying.
I can see the SCT share price rising above $2.60 in the medium term. I said in post 597, I thought that SCT was 'fair value' at $2.60. But if you read through that valuation, there are some quite aggressive assumptions which by selling today I will bank. Expanding that meat industry robotics division, I believe, is now limited by personnel. And the fact that the 'fullly automated beef boning room' (the holy grail) is still a development project means profits from that are not there. This is despite the fact that SCT's controlling shareholder has a ten year pipeline of work, just in Australia, when the technical hurdles are overcome. I am not sure that all shareholders realise this 'meat industry growth engine' is short term limited. The rest of the business is notoriously cyclical and I think in the medium term better dividend returns will be found for me elsewhere.
There is still the possibility of a game changing acquisition too. But SCT have a mixed record with acquisitions, so I wouldn't (and never have) banked on those.
My problem is, even after my share sale today, SCT is still my third biggest NZX holding (shows how overweight I had become)! So if the share price continues to improve I may yet have to sell some more :-(.
SNOOPY
discl: Hold SCT and disappointed, yet relieved, to have sold some down.