Monday 9 September 2013

I'll Take The Money Chris...(Portfolio Sale: Tullett Prebon)

Investing in the stock market is a bit like 'Who Wants to be a Millionaire: the same excitement of possibly getting rich very quickly and a range of tricky questions to answer (usually 'should I buy this?' or 'should I sell that?).

OK, there's no Chris Tarrent to cajole us along the way, to question our decisions or to write the cheques, but it comes down to the same dilemma: when the question gets too hard - and you've phoned a friend, gone 50/50 and asked the audience - do you walk away and keep the money or risk a guess?

Its always the same scenario: you look at your portfolio and one of your holding has shot up - do you sell or do you hold?

The answer to the classic question depends on a couple of factors (which I have examined in the past). With your rational hat on you will probably check the newflow for some kind of explanation for the price movement and try to assess whether this is something you expected or not (and if not - what do you expect next?). You might also try to find out what other investors think.

But ultimately your decision will probably be framed by your degree of loss aversion. A lot like the difficult decision to carry on or not on 'Who Wants to be a Millionaire'.

We all have a bit of it - it's one of our inbuilt behaviours that makes us fallible investors, as we'd rather sell something in profit than sell something that's down and crystallise a loss: in other words, our investment decisions are asymmetrical (and not in a good way).

But when the money is on the table - and will may be snatched away tomorrow - you should stop yourself from grabbing it too quickly but your monkey brain wants the banana now.

I bought Tullett Prebon just in March 2013 and added to it in April 2013 (selling that additional portion in July 2013). At the time it ticked all my boxes: good yield, international diversification, prospects for recovery and a cash pile. Now, 18 months later the price of that original investment has increased by a third. It may well increase a lot more but I'm taking the cash now.

Here's the decision process (for what it's worth):
  • the increase in capital value is higher than my 'trigger' of five times current annual income (in other words, five years' income is 'in the bag'.
  • the yield has fallen to around 4.5%: not bad but not particularly good either
  • I can't see anything much that has changed, so this probably means that I'm missing something
  • for once, I don't have much cash available at the moment in case an interesting opportunity pops up
  • and, finally, that price curve looks like it's going down again.

So I've taken the cash - and I'll try not to look at the share price for a while...

[Sale price: £3.80]

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. What are your capital value trigger figures? thx

    1. the equivalent of more than 5 years' dividend

  2. Hum... Five years' div, certainly, but it put on another 1.76% so far today... Maybe I should look at a bigger graph.. And it goes ex-div in six weeks. I think I'll take the coward's way out and put it on a stoploss at about 3.70!!

    1. Yes - I tried not to look: it went down and then up! And then up again today. Annoying, isn't it?