Take profits or cull poor performers?

[Brovendell]

With the increase in equities this year, I need to rebalance my portfolio. Do I take profits in NZE:POT with a P/E of 39.5 or do I sell ASX:TGA with a P/E of 11.45?

[Joshuatree]

Its a very personal decision Brovendell.POT keeps on confounding and increasing. The only little worry is if a big cruise ship misses its buoys and hitting the mussel bed cliffs and sinking and clogging up the narrow entrance to Tauranga harbour:p. What was your entry price into POT? Others i know sold earlier thinking the s/p was too rich but since a pause ,when POT share splittered itself its kept going to new heights. Less risk selling now.
TGA is doing the opposite on no news.I'm looking at buying more but not while its still falling. Govt regulations have been dealt with i thought. maybe an update soon will clarify things.last year it was in april . More risk buying now or soon but more potential gain imo DYOR.

[Brovendell]

In the last 5 years POT has increased SP by 111.85% according to Google finance. TGA has decreased SP by 13.03%

[macduffy]

I hold TGA and am guilty of taking my eye off the ball as the SP has been sold down. Clearly, there are problems - the company will probably call them "challenges" - but the RSI is as weak as its been in the last 10 years and at these levels, unless the challenges are terminal, I would expect some measure of recovery. I'll watch more carefully from here!

[Snoopy]

With the increase in equities this year, I need to rebalance my portfolio. Do I take profits in NZE:POT with a P/E of 39.5 or do I sell ASX:TGA with a P/E of 11.45?


Taking a look at the one year chart, Port of Tauranga has risen by about 25% over the year. Whereas Thorn Group Limited, a financial services company, has declined by around 20% in $A terms over the same time frame.

I note that these two companies are in entirely different market spaces. So what you have here is an 'apple' verses 'orange' comparison. That means you should not be comparing the two at all. Instead you need to figure out how these companies are doing in the respective markets in which they operate. That means looking at each industry as a whole and comparing the shares you hold with other companies operating in those market sectors.

You give a PE comparison between POT and TGA. But because that PE comparison is across different market sectors, and indeed different countries, that comparison is largely meaningless too.

Historical performance, except in the very short term future, is unlikely to be a harbinger of on going long term performance. You can only invest in the future, not in the past. So first you have to establish what your time frame for investment is. Then, if longer than a few months, you have to work out if the decline in TGA is a cyclical event, or if some fundamental on-going flaw in the business model has caused the decline.

I don't think anyone would disagree that POT is by far the better company of the two, by any operational measure you care to make. But is it a better investment going forwards? At today's lofty prices, this is far from clear.

SNOOPY

[carrera]

I've considered selling TGA, but I'd rather not sell something that is falling. i can't see that the business has changed since the selloff, it does have headwinds but i don't see the problems as terminal. i've seen valuations of 1.75-1.85 and the dividend is decent.

[Brovendell]

Thanks for the comments. As a buy and hold investor, I already own both shares and am not looking to purchase any more of either. Does one water the flowers or spray the weeds? Which is the flower and which is the weed? I agree, Snoopy, that at today's prices, it is far from clear which is the better investment going forwards. Not to buy but to keep.

[Joshuatree]

Good luck and hope you find clarity.i don't think of either as a weed but TGA is a possible opportunity to top up for me whereas POT is not.. Opinions I've read is that the ASIC rulings will actually favour TGA and eliminate competition as others e.g. franchises do drop out of that sector.. But uncertainty prevails atm until they announce.
There are threads for both stocks; may help in getting more comments.

[carrera]

wondering if any of the selloff is related to SIV and their equipment financing.

I've had similar issues recently deciding what to sell, the permutations of it all are mind boggling. i hold KMD, SRX and FLN which are down but I've decided i believe in them still, sold IMf which i still believe in to move into something else with a possibility of greater return. could have taken a profit elsewhere but I've taken profits around brexit so i'd be looking at cgt issues.

[Snow Leopard]

Whatever you do, you will probably wish you had not down the line.

Best Wishes
Paper Tiger

[Brovendell]

I suppose the way to go is the Buffet way and consider the shares as parts of a business. Forget about the share price and the p/es and ask oneself which business would one rather own going forward. The answer then becomes quite evident.

[percy]

With the increase in equities this year, I need to rebalance my portfolio. Do I take profits in NZE:POT with a P/E of 39.5 or do I sell ASX:TGA with a P/E of 11.45?

Keep your winners,sell your losers.
Try to have only winners in your portfolio.

[Snoopy]

I suppose the way to go is the Buffet way and consider the shares as parts of a business. Forget about the share price and the p/es and ask oneself which business would one rather own going forward. The answer then becomes quite evident.

I don't think Buffett ever 'forgets about the share price'. It is quite the contrary. It is the share price that determines value. If the value isn't there then Buffett won't buy it, regardless of how good the company is.

SNOOPY

[Brovendell]

I understand what you are saying Snoopy but my cunundrum is which company to SELL to balance the portfolio asset allocation. In other words to increase the cash component and reduce the share component. I have sold down POT in the past and watched the shareprice go up and up. As a long term holder of shares, I can't see Thorn Group giving a better return in the future than POT. The problem is the very high price that "Mr Market" puts on POT. I must say that I agree with Percy. I am not a trader. I think I am better off long term keeping my "winners".

[h2so4]

I understand what you are saying Snoopy but my cunundrum is which company to SELL to balance the portfolio. I have sold down POT in the past and watched the shareprice go up and up. As a long term holder of shares, I can't see Thorn Group giving a better return in the future than POT. The problem is the very high price that "Mr Market" puts on POT. I must say that I agree with Percy. I am not a trader. I think I am better off long term keeping my "winners".

All my boats are measured by the tonnage. So at 9500 tons POT would get up to 25% allowable space and TGA at 1000t would be allocated up to 10% Of course I am referring to market cap and my portfolio balancing takes place at the time of purchase. I have never seen a need to rebalance after that.

[GTM 3442]

I understand what you are saying Snoopy but my cunundrum is which company to SELL to balance the portfolio asset allocation. In other words to increase the cash component and reduce the share component. I have sold down POT in the past and watched the shareprice go up and up. As a long term holder of shares, I can't see Thorn Group giving a better return in the future than POT. The problem is the very high price that "Mr Market" puts on POT. I must say that I agree with Percy. I am not a trader. I think I am better off long term keeping my "winners".

I tend to rebalance incrementally over time.

So if one asset class is doing well, rather than chop that one back, I try to build up the others - interest income, dividends, new money, money from selling the dogs, etc.

It takes time, is a dynamic process, I never actually get to my desired allocation profile, but I'm always heading in the right direction.