Why I sold Target (TGT)

Selling stocks isn´t something I want to do often, but let´s just make it simple: If you need money, sell. I purchased Target around $53 and sold yesterday at $59. Total profit was only 5%. I never intended this investment to be a buy and hold forever kind of thing. However, owning a stock for only 188 days is short. I admit that.

So why did I sell?

Stock argument:

  • While Target is soon to become a dividend king, the online sells only makes up about 5% of targets earnings. management is working hard to become better at this area, and are now growing e-sales with 20% yearly. However, it will take time before they can compete with Amazon and other retail stores. In short, there are better investments around, even in the retail sector too, where you don´t need to involve yourself in the battle against Amazon.  I think the clue when investing in Retail is to find companies who actually are selling a lot online, such as XXL (norwegian) and Byggmax (swedish)

Life argument:

  • As I said in my latest Dividend Income Update, I have a lot of stuff going on, and most happenings are expensive.
    • Eye Surgery: $4000
    • Moving and living in Tokyo for half a year: Maybe $10000?
    • Travelling around for 2 months: Maybe $5000?
    • Total: $19000
  • For me, the single most important factor is to always have control. Right now, I have around $18000 in my savings account with 2.10% interest. Meaning, I can cover my expenses without any problems. This gives me comfort, and while having so much cash in a saving account might not suit you, it suits me. However, if I see that I can get by with only $12k or $15k, I will invest, but patience and doing nothing is also a skill we need to learn. Right now, I´m waiting for some answers if I can get the eye surgery payment done with a  interest-free loan over 2 years, which would mean that I can invest around $1000!

 

I know that this post wasn´t the most exiting stuff that I´ve written. But, I wanted to emphasize that the battle between investor vs everyday challenges is real for me too. The future is complex and the only thing we can do is to prepare and make plans.

Take care,

Stockles


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12 comments

  1. So you sold your stock not too generate cash for your plans but because you are not willing to wait until they expand their online sales (and receive the dividends in the meantime)? Maybe I read it wrong but I’m not really following you 🙂

  2. Well, it’s always good to have enough cash on the side to cover any unexpected big expenses. Nothing wrong with that, as you should never put yourself in a position where you are forced to sell your investments.

    Even though you sold your TGT shares to raise cash, at least you made some profit out of that.

    But still, damn it man, you sold a dividend aristocrat that is soon to be a div king. I only shop at target and it’s always busy. I shop online for only items that are cheaper online or not available in the store.

    I hate having to deal with all the shipping boxes. I enjoy going to Target, the store is always clean and well staffed. They are also making several changes such as drive thru pickup, l am quite confident they will be fine and if worst comes to worst, Amazon would likely buy them.

    Man, still can’t believe it you sold Target 🙂

    1. Hi Mr. ATM,

      I guess we are talking from different perspectives here, I´ll try to explain:

      1)
      Since $ is not my currency (I´m norwegian), I always have to balance how exposed I am to the US economy and the dollar. One example is that lately all of my US stock have fallen from 5 – 10 % due to lower USD/NOK. The norwegian currency is a currency that is strongly correlated with the oil price. Within 12 to 24 months, the price per barrel is exptected to go up, making the NOK higher and the USD lower. This is one factor that we foreigners always have to deal with.

      2)
      While you have a lot of experience with Target, both emotionally and physically, it only exist as a stock / company name for me. I have never seen a Target store in real life (we don´t have them in europe). Therefor it´s harder for me to choose Target over one of our nordic retail companies. Buffet always said that one should investent in what you know / understand. Retial is pretty simple, but it´s clear that the physical intereactin is something I have to neglect in my evaluation.

      3)
      While Target is a dividend aristocrat, I think it´s important to aknowledge that the whole sector is changing to due the internet. Few retailers have the same MOAT as they did before. I guess I´m saying it was easier before the whole E-commerce thing happened. Therefor, I wouldn´t feel to comfertable using the “Aristocrat/King” rule as a way of saying that this is a great investment (I know you don´t since you are a smart guy, but some people do).

      Hope to see you back in this discussion ATM!

      1. Hi Stockles,

        Thanks for sharing your prespective.

        I just read an article about prediction for oil price to hit $10/barrel in the next 5-10 years due to major shift to electric cars. According to that article, 70% of oil is used as fuel today. Therefore, long-term trend for oil prices is not looking good. I would think Norway’s economy have to diversify itself away from oil pretty quickly.

        I do own a Canadian stock, but it is traded on US stock exchange in US dollars; however, the dividends are still payed in Canadian dollars which then have to be converted into US dollars in my account, and therefore payout fluctuates due to currency exchange rate. So, I understand your concern around currency fluctuation, though I see it as a cost of investing in foreign stocks and one can mitigate some of that risk by limiting exposure or diversifying across several currencies.

        I don’t know what long-term lower oil price trend is going to do for US/NOK exchange, but that is something you will have to keep an eye on rather than worrying about what oil does in short-term (12- 24mo). At least that would be my approach for dealing with such currency issues or I wouldn’t invest in foregn stocks.

        Regarding Target and in general retail stores, I get it and understand where you are coming from. You have never been to a Target store, so you don’t have the experience of using their services or products.

        But this is nothing new or unique, I invest in many companies whose products I will never use because they are not targeted for consumers like myself, but they are still great companies for investment. I bet, even Buffet invests in stocks of companies that he never uses their products.

        I don’t take everything Buffet does or doesn’t do literally. He likes to drink Coke and eat McDonald’s hamburgers, something I would never do as I believe that stuff is not good for my body.

        I think the whole e-commerce thing is over blown, I don’t believe physical stores will go away in entirety. The weak ones will get out of business or get bought out, but the strong ones like Wal-Markt or Target will adjust to new hybrid approach of doing business and will thrive.

        I can not see the world, where nobody wants to go out for shopping. For lot of people, specially ladies, shopping is analogous to entertainment.

        I even enjoy walking around in the store and checking out products or trying out clothes. I can’t do any of that online, or even if there was something like virtual reality, it wouldn’t be the same experience.

        Investing in retail is currently like buying a house in the worst neighborhood during a downturn, you buy the best house at the cheapest price, and wait for housing market to turnaround and make a huge profit.

        Aristocrat/King should not be the only measure of dividend safety, however, it still is a strong measure of a company’s success in generating cash over a very long period of time while steering through all types of challenges, big and small. The only way a company can do this is by running a successful business and having a very smart management that is also friendly to shareholders.

        In any case, you made your decision based on your own perspectives and risk/reward assessment, which I can respect and can’t argue with, so good luck to you.

        Take care,
        Mr. ATM

  3. I’m surprised to see you sell off TGT. I doubled my position last time they had a big dip and I know a lot of my friends gave me crap about it. Since then, it has rebounded exactly how I said it would while I collected dividends in between. Yes it has its struggles against Amazon like everyone else. But I like owning companies that I use or shop at. TGT is always a favorite and is always busy. While their online presence is not that big yet, it’s online growth the past few years keeps getting bigger. They still have good management at the helm and I think they can continue to provide dividends for the long game. Or at least the time being. I’ll hold until anything changes. Glad you were able to take some gain though on your sell.

    1. Hi Dividend Daze,

      Yes me too. I also like to own companies that I interact with and that was one of the reason for ME to sell. There are so many companies out there that could be in my portfolio, so I choose to not own a company I have to interaction with what so ever. As you can see in your comment, parts of your reason for buying more tgt is the interaction i´m lacking.

      thanks for commenting!

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