Earlier this week, I closed my position in W.W. Grainger (GWW).
I had purchased GWW not too long ago, in May of this year. At that time, GWW had fallen close to 30% since the beginning of the year, and I thought there was value there. So, despite owning Fastenal (FAST) already, which is in the same sector and similar industry, and despite not knowing if I would ultimately hold GWW long-term, I decided to initiate a position.
As GWW drifted around in price over the summer, and with having to stare at both GWW and FAST in the portfolio each month, I contemplated choosing to go with only one of the two. If it ended up being GWW, I’d plan to increase the position, as it was one of the smallest in my portfolio. In the last couple of Portfolio Thoughts posts I mentioned choosing between the two companies.
After some research, I decided that FAST was the one to keep in the portfolio. The current yield of each stock was close enough to be a wash. GWW has the longer history of consecutive dividend increases by a wide margin, and a lower payout ratio. However, FAST has shown not only better historical sales and earnings growth, but recent sales and earnings growth as well. In addition, GWW’s decline in % pre-tax profit on sales in recent years is a concern, as it suggests management could be doing a better job. With the decision to sell GWW made, I waited for an exit opportunity. Once GWW gapped up earlier this week with the release of its quarterly earning report, I decided to execute the sale.
GWW
On 10/17/17, I sold all 20.308 shares at $200.00/sh, for a total of $4061.51.
With the sale, I realized a short-term capital gain of $502.14, primarily thanks to its recent price surge.
This sale results in a reduction of $103.98 in annual forward dividend income. I’ll look to re-deploy the capital obtained in the sale into another dividend-paying stock soon. I’ve been keeping my eyes peeled for an opportunity in the Information Technology sector.
Do you have any comments with regard to GWW versus FAST? I know the DGI community does not like to see sales of good dividend-paying stocks, and GWW is certainly that, with a streak of 45 years of increased dividend payments. I’ll be interested to hear your thoughts.
I figured some people might sell after the recent price surge. I don’t own, but I am typically against selling stocks unless there is a pretty substantial fundamental change in the stock or the dividend was cut. Are you planning on selling a stock in a loss position to offset the short-term gain? Any short-term losses on your book? I know that tax bill won’t be easy to see! What’s next for your portfolio? What stocks are you watching now?
Bert
I’ll look over the portfolio before year’s end and see if I have some capital losses I may want to realize to offset some of this year’s realized gains. I had a net gain for this year, prior to this sale, so this only adds to it. I’m mindful of the tax implications of my sell transactions, but I tend not to let them influence my decisions. I plan to issue another Portfolio Thoughts post this week, so stay tuned on that front. Thanks for commenting, Bert!
I am still holding on to my shares of GWW. what will you buy next with the money?
Hi Felix, I can see why one would hold on to GWW. It just wasn’t the best fit for my portfolio at this time. Not sure what the next buy will be… hoping to line up some candidates over the next few days.
I still like GWW long term. It’s been with me for almost a decade and I plan to keep it for the foreseeable future. Sure, there are questions about AMZN encroaching on its turf but for now I don’t see the threat as something that can derail the company these days. Like FV above I’m still holding GWW.
Certainly understandable to keep holding GWW. Selling was just the right decision for me at this time. I suspect GWW will do well over the long term as well, but I think FAST might do a little better. We’ll have to wait to see how it plays out… hopefully we’ll both be long-term winners.