Sell Home Depot?

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KPG
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Sell Home Depot?

Post by KPG » Wed Jan 17, 2018 2:42 pm

I know bogleheads don't like individual stocks. I have been trying to consolidate my portfolio for years now, but the capital gains are killing me. Sell HD or do Roth conversion? Bought 200 shares of HD in 2000 for $9837. Dividend total to 12-31-2017 was $3965. Today HD is about $199. a share, which would be about $39800. Did some research, HD very good stock, probably won't split, dividend probably will go up, projected share price keeps going up. Any comments, insight or suggestions are very much appreciated.
Thanks, KPG

WhiteMaxima
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Re: Sell Home Depot?

Post by WhiteMaxima » Wed Jan 17, 2018 2:45 pm

keep it. It's a very good stock. Do drip overtime and you are going to be end big.

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HomerJ
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Re: Sell Home Depot?

Post by HomerJ » Wed Jan 17, 2018 2:46 pm

sell it. It's a going to be very poor stock. You are going to end up losing.

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Pajamas
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Re: Sell Home Depot?

Post by Pajamas » Wed Jan 17, 2018 2:46 pm

How would you feel if it dropped by 50%? If you are okay with that, then don't worry about holding it.

Jack FFR1846
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Re: Sell Home Depot?

Post by Jack FFR1846 » Wed Jan 17, 2018 2:47 pm

LTCG are now 15%. I don't see that as "killing" anyone. Although your state LTCG will add to that.

I don't do single stocks so can't see why you'd keep it.
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WoodSpinner
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Re: Sell Home Depot?

Post by WoodSpinner » Wed Jan 17, 2018 2:48 pm

KPG,

I am donating similar types if stock with large gains to a Donor Advised Fund, DAF. It will fund my charitable contributions for years and allow me to Itemize and capture my SALT AND Mortgage deductions.

Just a thought ....

WoodSpinner

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topper1296
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Re: Sell Home Depot?

Post by topper1296 » Wed Jan 17, 2018 2:51 pm

HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
Based on....


I'm one that is mainly indexed, however I also have individual stocks. Why not sell half of it and keep the rest? HD is a good company.

WhiteMaxima
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Re: Sell Home Depot?

Post by WhiteMaxima » Wed Jan 17, 2018 2:55 pm

If HD drop 50%, you drip would buy twice as much share of HD. Sell HD if you have lean year so LTCG tax is zero. If you have heir, you will leave HD to them and step up (they can sell and no cap gain). If you believe human still need live in a house, the HD or Loews will always be a good investment.

KPG
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Re: Sell Home Depot?

Post by KPG » Wed Jan 17, 2018 3:08 pm

WhiteMaxima - do drip overtime?

Referring to capital gains killing me. I have RMD coming in about 6 years and wanting to convert some as to not be in higher tax bracket in 6 years. Use capital gains on conversion or sell HD and some conversion. I sold off a stock I had for many years in 2017, thought it had peaked, my capital gains put us in bracket that I have to pay more for medicare. KPG
Last edited by KPG on Wed Jan 17, 2018 6:49 pm, edited 1 time in total.

KPG
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Re: Sell Home Depot?

Post by KPG » Wed Jan 17, 2018 4:39 pm

WhiteMaxima, DRIP, dividend reinvestment plan, sounds good, Thanks,KPG

Mr.BB
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Re: Sell Home Depot?

Post by Mr.BB » Wed Jan 17, 2018 5:48 pm

Nothing wrong with owing individual stocks, as long as it is not the majority of your portfolio. Looks like you have made a very nice profit; congratulations. But just a reminder, it is only profit on paper. Why not take some profit and perhaps pad your emergency fund? Or another way to think about this is if you sell enough shares to cover your original investment amount, then even if the stock went to zero...you've lost nothing.
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Pajamas
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Re: Sell Home Depot?

Post by Pajamas » Wed Jan 17, 2018 6:40 pm

KPG wrote:
Wed Jan 17, 2018 4:39 pm
WhiteMaxima, DRIP, dividend reinvestment plan, sounds good, Thanks,KPG
For heaven's sake, if you are concerned about a concentrated holding in a single stock, don't buy more through a DRIP. Put the dividends you receive into something else, like an index fund. Don't make your problem worse!

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Re: Sell Home Depot?

Post by cherijoh » Wed Jan 17, 2018 6:59 pm

Pajamas wrote:
Wed Jan 17, 2018 6:40 pm
KPG wrote:
Wed Jan 17, 2018 4:39 pm
WhiteMaxima, DRIP, dividend reinvestment plan, sounds good, Thanks,KPG
For heaven's sake, if you are concerned about a concentrated holding in a single stock, don't buy more through a DRIP. Put the dividends you receive into something else, like an index fund. Don't make your problem worse!
+1

Bwlonge
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Re: Sell Home Depot?

Post by Bwlonge » Wed Jan 17, 2018 7:21 pm

WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.

TonyDAntonio
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Re: Sell Home Depot?

Post by TonyDAntonio » Wed Jan 17, 2018 7:28 pm

I just sold all of my HD stock my wife bought me 20 or so years ago...24 shares. I'm going to get 'killed' in taxes. 😀

Basically, in retirement I'm just trying to simplify everything: no individual stock, everything in Vanguard or Treasury Direct, etc. HD had to go. Been a great stock though. Complete luck my wife bought it and I held it.

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Ged
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Re: Sell Home Depot?

Post by Ged » Wed Jan 17, 2018 7:35 pm

Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm
WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.
I'll throw my 2 cents in. HD is a very volatile stock, very sensitive to the economy. Sell it and put the winnings in a more diversified holding.

MrPotatoHead
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Re: Sell Home Depot?

Post by MrPotatoHead » Wed Jan 17, 2018 8:54 pm

When it comes to making a sell decision, in terms of outside analysis I have never seen anything better than Valueline. I am a bit more jaundice when it comes to their buys, but their sells always seem spot on. In other words, if Valueline said sell, I would sell. Right now they are pro HD and a bit cooler toward Lowes. Also consider we may be on the verge of huge boom in construction and remodeling, the latter HD has a huge advantage over Lowes (IMO one really messed up company).

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Re: Sell Home Depot?

Post by Grt2bOutdoors » Wed Jan 17, 2018 9:22 pm

Ged wrote:
Wed Jan 17, 2018 7:35 pm
Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm
WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.
I'll throw my 2 cents in. HD is a very volatile stock, very sensitive to the economy. Sell it and put the winnings in a more diversified holding.
The local HD parking lot is nearly always full, doesn't matter what time of the day you go.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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HomerJ
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Re: Sell Home Depot?

Post by HomerJ » Thu Jan 18, 2018 1:01 pm

topper1296 wrote:
Wed Jan 17, 2018 2:51 pm
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
Based on....
My prediction was just as solid as WhiteMaximia's who guaranteed the OP was going to end up big with Home Depot stock.
Last edited by HomerJ on Thu Jan 18, 2018 1:08 pm, edited 1 time in total.

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HomerJ
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Re: Sell Home Depot?

Post by HomerJ » Thu Jan 18, 2018 1:02 pm

Pajamas wrote:
Wed Jan 17, 2018 6:40 pm
KPG wrote:
Wed Jan 17, 2018 4:39 pm
WhiteMaxima, DRIP, dividend reinvestment plan, sounds good, Thanks,KPG
For heaven's sake, if you are concerned about a concentrated holding in a single stock, don't buy more through a DRIP. Put the dividends you receive into something else, like an index fund. Don't make your problem worse!
Plus it makes taxes even harder to calculate. Sure, it's not the end of the world, but I don't enjoy stocks in taxable accounts and keeping track of four dozen stock purchases (of the same single stock!)

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HomerJ
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Re: Sell Home Depot?

Post by HomerJ » Thu Jan 18, 2018 1:08 pm

Grt2bOutdoors wrote:
Wed Jan 17, 2018 9:22 pm
Ged wrote:
Wed Jan 17, 2018 7:35 pm
Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm
WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.
I'll throw my 2 cents in. HD is a very volatile stock, very sensitive to the economy. Sell it and put the winnings in a more diversified holding.
The local HD parking lot is nearly always full, doesn't matter what time of the day you go.
Have you gone to the parking lot during a recession? Like Ged said, very sensitive to the economy. Home improvement projects are a pretty easy line-item to cut when people are worried about money.

tesuzuki2002
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Re: Sell Home Depot?

Post by tesuzuki2002 » Thu Jan 18, 2018 2:50 pm

KPG wrote:
Wed Jan 17, 2018 2:42 pm
I know bogleheads don't like individual stocks. I have been trying to consolidate my portfolio for years now, but the capital gains are killing me. Sell HD or do Roth conversion? Bought 200 shares of HD in 2000 for $9837. Dividend total to 12-31-2017 was $3965. Today HD is about $199. a share, which would be about $39800. Did some research, HD very good stock, probably won't split, dividend probably will go up, projected share price keeps going up. Any comments, insight or suggestions are very much appreciated.
Thanks, KPG
I'm holding mine! HD is the leader in the home improvement space.. and people are crazy about improving their homes...

tesuzuki2002
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Re: Sell Home Depot?

Post by tesuzuki2002 » Thu Jan 18, 2018 2:52 pm

:sharebeer :confused :moneybag :D
Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm
WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.

3funder
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Re: Sell Home Depot?

Post by 3funder » Thu Jan 18, 2018 3:14 pm

If you have a reasonable LTCG rate, sell whatever percentage makes you comfortable and move on.

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BL
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Re: Sell Home Depot?

Post by BL » Thu Jan 18, 2018 3:25 pm

Have you turned off reinvesting dividends/capital gains? If not, suggest you do so now so you don't keep buying more of something you want to get rid of.

If you have been reinvesting, that looks like about $4000 more in basis that you won't have to pay CG tax on.

Grt2bOutdoors
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Re: Sell Home Depot?

Post by Grt2bOutdoors » Thu Jan 18, 2018 4:55 pm

HomerJ wrote:
Thu Jan 18, 2018 1:08 pm
Grt2bOutdoors wrote:
Wed Jan 17, 2018 9:22 pm
Ged wrote:
Wed Jan 17, 2018 7:35 pm
Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm
WhiteMaxima wrote:
Wed Jan 17, 2018 2:45 pm
keep it. It's a very good stock. Do drip overtime and you are going to be end big.
HomerJ wrote:
Wed Jan 17, 2018 2:46 pm
sell it. It's a going to be very poor stock. You are going to end up losing.
And there you have it, 99% of stock advice threads.
I'll throw my 2 cents in. HD is a very volatile stock, very sensitive to the economy. Sell it and put the winnings in a more diversified holding.
The local HD parking lot is nearly always full, doesn't matter what time of the day you go.
Have you gone to the parking lot during a recession? Like Ged said, very sensitive to the economy. Home improvement projects are a pretty easy line-item to cut when people are worried about money.
Best time to get a contractor at Boglehead prices is during a recession. Did it twice, visited HD plenty of times, worried a bit, did it anyway because it was essential work as opposed to lifestyle choice.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

GibsonL6s
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Re: Sell Home Depot?

Post by GibsonL6s » Thu Jan 18, 2018 5:10 pm

Since 1993 it has returned 14% compared to 9.8% for the S&P annual Standard Deviation 25.6 compared to 14%. Also it makes up 1% of the S&P 500. So more volatile than the index but has had higher returns. I don't know if I would sell and pay taxes if it was a minor percent of my overall portfolio. Good luck

KPG
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Re: Sell Home Depot?

Post by KPG » Thu Jan 18, 2018 10:10 pm

Thanks to everyone who answered my post. I value all opinions. HD is about 1.9% of my portfolio and I think I am going to hold onto it for now. KPG

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topper1296
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Re: Sell Home Depot?

Post by topper1296 » Thu Jan 18, 2018 10:11 pm

Grt2bOutdoors wrote:
Thu Jan 18, 2018 4:55 pm
HomerJ wrote:
Thu Jan 18, 2018 1:08 pm
Grt2bOutdoors wrote:
Wed Jan 17, 2018 9:22 pm
Ged wrote:
Wed Jan 17, 2018 7:35 pm
Bwlonge wrote:
Wed Jan 17, 2018 7:21 pm




And there you have it, 99% of stock advice threads.
I'll throw my 2 cents in. HD is a very volatile stock, very sensitive to the economy. Sell it and put the winnings in a more diversified holding.
The local HD parking lot is nearly always full, doesn't matter what time of the day you go.
Have you gone to the parking lot during a recession? Like Ged said, very sensitive to the economy. Home improvement projects are a pretty easy line-item to cut when people are worried about money.
Best time to get a contractor at Boglehead prices is during a recession. Did it twice, visited HD plenty of times, worried a bit, did it anyway because it was essential work as opposed to lifestyle choice.
Doesn't matter if there is a recession or not if you have to rebuild after a natural disaster.

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Re: Sell Home Depot?

Post by z3r0c00l » Thu Jan 18, 2018 10:18 pm

KPG wrote:
Wed Jan 17, 2018 2:42 pm
probably won't split
Stock splits are meaningless to the investor. It is a neutral manipulation in the price per share that only has psychological value, not real.

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randomizer
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Re: Sell Home Depot?

Post by randomizer » Thu Jan 18, 2018 10:28 pm

Long term capital gains are cheap enough a price to pay for the peace of mind of knowing you've moved to a diversified index fund.

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HomerJ
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Re: Sell Home Depot?

Post by HomerJ » Thu Jan 18, 2018 11:32 pm

Grt2bOutdoors wrote:
Thu Jan 18, 2018 4:55 pm
Best time to get a contractor at Boglehead prices is during a recession. Did it twice, visited HD plenty of times, worried a bit, did it anyway because it was essential work as opposed to lifestyle choice.
Heh, sure... but there's not enough Bogleheads to prop up Home Depot's stock during a recession.

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CyclingDuo
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Re: Sell Home Depot?

Post by CyclingDuo » Fri Jan 19, 2018 8:37 am

KPG wrote:
Thu Jan 18, 2018 10:10 pm
Thanks to everyone who answered my post. I value all opinions. HD is about 1.9% of my portfolio and I think I am going to hold onto it for now. KPG
I'd say that is wise. You invested in a good company and have captured excellent returns. You have tripled the return of the S&P 500 since you bought it. My kids have owned it since late 1995, so it's been an excellent performer as an investment in their portfolios.

One thing is known about the future. There will be fires, floods, tornadoes, hurricanes, ice storms, wind storms, hail, snowstorms, and millions of homeowners upgrading, and replacing things through regular maintenance year in and year out. In addition, we will continue to have 4 seasons year in and year out that involve all matters gardening and landscaping. Wash. Rinse. Repeat. HD is well positioned to continue to capture their share of all of that. Share price will rise and fall through the economic cycle, but for longer term investing of a good company no need to watch the share price too closely. If something changes materially for the negative in the business model, earnings, and management - then assessing whether or not it deserves remaining in your portfolio comes into play. Until then, our family is not in fear of sticking with our shares for another decade.

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Re: Sell Home Depot?

Post by Nowizard » Fri Jan 19, 2018 11:51 am

If no one can predict the market, then no one can predict an individual stock's movements with certainty. The issues to me are twofold: 1. Taxes, as you mentioned. Though not desired, paying capital gains is much preferred than using a loss to offset other presumed gains. Fear of taxes has often resulted in not having to pay them due to depreciation of asset value, 2. If selling all puts you in a different tax bracket, then you could figure out where that occurrs and sell some shares.
Another issue that may not be mentioned is that owning HD may be balm for an itch to have some money in the market that you use to avoid excessive buying and selling elsewhere in your portfolio. I have that itch and scratch it with one, sometimes two, individual stocks. Watching its or their movement keeps me in line with other investments since I am still learning to become as disciplined as some here already appear to be.

Tim

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Re: Sell Home Depot?

Post by Pale Horse » Fri Jan 19, 2018 12:51 pm

WhiteMaxima wrote:
Wed Jan 17, 2018 2:55 pm
If you believe human still need live in a house, the HD or Loews will always be a good investment.
Can't argue with that logic, just ask Builder's Square, Home Quarters Warehouse, Handy Dan, HomeBase, etc., etc.

miamivice
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Re: Sell Home Depot?

Post by miamivice » Sat Jan 20, 2018 1:06 pm

How would you feel if Home Depot went bankrupt in the next week and you lost your entire investment?

This has happened before, to companies that have appeared very strong.

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CyclingDuo
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Re: Sell Home Depot?

Post by CyclingDuo » Sat Jan 20, 2018 4:32 pm

miamivice wrote:
Sat Jan 20, 2018 1:06 pm
How would you feel if Home Depot went bankrupt in the next week and you lost your entire investment?

This has happened before, to companies that have appeared very strong.
The OP has owned HD since 2000 - meaning this is the 18th year of the OP owning the shares. The company is not going bankrupt next week. :oops:

Have a look at their balance sheet if you would like confirmation of that.

mwm158
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Re: Sell Home Depot?

Post by mwm158 » Sat Jan 20, 2018 4:41 pm

The obvious concern with owning an individual stock is you take on uncompensated risk. Stocks are priced to what they would be worth in a diversified portfolio. Since it is only 2% of your portfolio, it's not a big deal for you. In your situation, I would hold onto it but reinvest dividends elsewhere.

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Re: Sell Home Depot?

Post by z3r0c00l » Sat Jan 20, 2018 5:16 pm

CyclingDuo wrote:
Sat Jan 20, 2018 4:32 pm
miamivice wrote:
Sat Jan 20, 2018 1:06 pm
How would you feel if Home Depot went bankrupt in the next week and you lost your entire investment?

This has happened before, to companies that have appeared very strong.
The OP has owned HD since 2000 - meaning this is the 18th year of the OP owning the shares. The company is not going bankrupt next week. :oops:

Have a look at their balance sheet if you would like confirmation of that.
As soon as I finish reading the balance sheet for Enron and Lehman Brothers. LB was around for 158 years. And then almost overnight, it was gone. One can even see examples from the same industry, Lumber Liquidators was at risk of going bankrupt too though it looks like they have survived for now. I honestly don't think HD will go away any time soon. But the benefit of not owning individual stocks is you don't have to worry about those kinds of things, likely or not.

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CyclingDuo
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Re: Sell Home Depot?

Post by CyclingDuo » Sat Jan 20, 2018 7:04 pm

z3r0c00l wrote:
Sat Jan 20, 2018 5:16 pm
As soon as I finish reading the balance sheet for Enron and Lehman Brothers. LB was around for 158 years. And then almost overnight, it was gone. One can even see examples from the same industry, Lumber Liquidators was at risk of going bankrupt too though it looks like they have survived for now. I honestly don't think HD will go away any time soon. But the benefit of not owning individual stocks is you don't have to worry about those kinds of things, likely or not.
Ah...it's only a matter of time before an Enron (fraud), a Worldcom (fraud), a Lehman Brothers (sub-prime mortgage crisis and their thirst/greed to use an extremely high level of leverage which was a terrible miscalculation on their part), or another reference is brought into a discussion with regard to stocks. No argument about the risk/reward scenario of an individual stock, or a portfolio of individual stocks, or a portfolio of mutual funds.

However, not all companies are fraudulent, or practicing massive miscalculations.

The OP has held HD for nearly 18 years now, including through the housing crisis, and sub-prime derivative meltdown financial crisis. The OP didn't mention worrying about those kind of things. It was more about the capital gains and return received to date from the share price appreciation, and dividends over the past 18 years as the OP was wondering about the work of portfolio consolidation.

HD has outperformed the Total Stock Market and the S&P 500 in the OP's time frame. No guarantees it will do the same over the next 18 years, but many of us would be surprised if it turns out to be a fraudulent company, or they use leverage to the extent the doors have to be closed.

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Re: Sell Home Depot?

Post by togb » Sat Jan 20, 2018 7:40 pm

Only you can decide what to do. I sold my HD last year and made money but it was in an IRA.
If I had held it in my brokerage account, I'd do the same as I did with my AXP. I had a big profit so I sold some and incurred capital gains, donated some to my charitable trust (which saved me way more taxes than those modest capital gains I just incurred) and kept the rest. Now I'm playing house money-- since my stack and a tidy profit have been locked in.

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Re: Sell Home Depot?

Post by livesoft » Sun Jan 21, 2018 3:16 am

1.9% of your portfolio? HD is also 0.8% of Total US Stock Market Index, so it's not like all the rest of us don't have a significant slug of it. I don't see any point of owning the individual stock except to give you a good feeling in social media forums or when you drive by a full HD parking lot.

I probably own more Apple and Microsoft combined than HD. And I don't even own any individual stocks.

http://portfolios.morningstar.com/fund/ ... ture=en-US

You can even have someone else make the decision to sell HD for you: Sell covered call options for your HD shares. Then when your shares are called away, it won't be your decision. That at least will overcome the behavioral trap that you find yourself in.
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cheesepep
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Re: Sell Home Depot?

Post by cheesepep » Sun Jan 21, 2018 4:32 am

Not sure why people are so adverse to selling stocks here. It is a profit. A profit is a profit. The fact that you have to pay tax on it is good. It means that you made money. Nothing wrong with that. Selling it is like ripping off a bandaid. It hurts and it stings only for a short moment but you will be glad that you did.

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Re: Sell Home Depot?

Post by miamivice » Sun Jan 21, 2018 10:15 am

CyclingDuo wrote:
Sat Jan 20, 2018 4:32 pm
miamivice wrote:
Sat Jan 20, 2018 1:06 pm
How would you feel if Home Depot went bankrupt in the next week and you lost your entire investment?

This has happened before, to companies that have appeared very strong.
The OP has owned HD since 2000 - meaning this is the 18th year of the OP owning the shares. The company is not going bankrupt next week. :oops:

Have a look at their balance sheet if you would like confirmation of that.
Most likely, yes.

However, as a recent example, for a long time I was the owner of Pacific Gas and Electric, and the stock appreciated handsomely. Then bam, wildfires started in California, and apparently are likely to be the result of PG&E owned powerlines. The stock has tanked (gone down by 50%) in the last few months, they have stopped their dividend. The total damages from wildfires is $9 billion, and insurance will only cover a fraction of this cost. I don't think bankruptcy is out of the question.

So yes, weird things can happen that can cause a company to sink or go under in a blink of an eye. Even strong companies. That is why it is good to diversify and spread risk around.

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Re: Sell Home Depot?

Post by Boglegrappler » Sun Jan 21, 2018 10:41 am

Thanks to everyone who answered my post. I value all opinions. HD is about 1.9% of my portfolio and I think I am going to hold onto it for now. KPG
One thing about the Boglehead's creed that seems not well understood is that index funds are generally recommended for several reasons. One is that the management fees and expenses are quite low. Two is that they aren't attempting to pick the winners through active management, which often leads to incorrect decisions that don't beat owning the whole market continuously. Three is that they are diversified, so that no one event specific to one company or industry can harm you seriously.

It seems to me that there isn't much wrong with owning, say 50 stocks that are diversified across several factors, that you choose yourself. You have no management fees to pay. Your commissions won't be all that high if you use Vanguard or Fidelity. And no stock is worth more than 2% of your portfolio to begin with. The biggest risk compared to index funds is that you're a little less diversified, and...you're much more likely to try to time the market or be lured into making portfolio changes at what turn out to be the wrong times. You might also become "unconsciously" concentrated in, say consumer staples, and miss out on growth in certain areas (or the opposite).

We have substantial index fund positions, but also own quite a few individual stocks (dozens). Maybe that doesn't make a lot of sense to some, but it doesn't bother me. It also gives you the option of doing tax loss harvesting if you choose, and it insulates you from having your capital gains realization determined partly by someone else. I track the collective portfolio against the index funds. We do pretty close to the same, depending on which time period it is. This is based on the past 10 years or so. I understand that 100 basis points of underperformance over time would be quite a drag, but so far we haven't seen that. To me, the biggest advantage of the index fund is not having to worry about whether I should react to some news, or make a switch from, say, Clorox to Amazon :). Other than that, if you portfolio is large enough and you have the time, I think you can end up just about the same.

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Re: Sell Home Depot?

Post by KyleAAA » Sun Jan 21, 2018 10:54 am

HD has returned just over 22% annualized since 1985. They are over $100 billion in revenue now, though, and I don’t see it having that level of success over then next 10 or 20 years. I suppose there are still international markets, but the US market seems relatively saturated at this point.

Although they are hiring in my area so if the consensus is they can continue growing double digits over the next decade, maybe I should apply and get those RSUs.

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CyclingDuo
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Re: Sell Home Depot?

Post by CyclingDuo » Sun Jan 21, 2018 11:30 am

miamivice wrote:
Sun Jan 21, 2018 10:15 am
CyclingDuo wrote:
Sat Jan 20, 2018 4:32 pm
miamivice wrote:
Sat Jan 20, 2018 1:06 pm
How would you feel if Home Depot went bankrupt in the next week and you lost your entire investment?

This has happened before, to companies that have appeared very strong.
The OP has owned HD since 2000 - meaning this is the 18th year of the OP owning the shares. The company is not going bankrupt next week. :oops:

Have a look at their balance sheet if you would like confirmation of that.
Most likely, yes.

However, as a recent example, for a long time I was the owner of Pacific Gas and Electric, and the stock appreciated handsomely. Then bam, wildfires started in California, and apparently are likely to be the result of PG&E owned powerlines. The stock has tanked (gone down by 50%) in the last few months, they have stopped their dividend. The total damages from wildfires is $9 billion, and insurance will only cover a fraction of this cost. I don't think bankruptcy is out of the question.

So yes, weird things can happen that can cause a company to sink or go under in a blink of an eye. Even strong companies. That is why it is good to diversify and spread risk around.
I am in agreement. But again, we can look under the hood a bit of any single stock situation to see if it does or does not apply to all others. There are a few hundred I would be happy to have tossed out of the index funds permanently, but we have to own the bad with the good.

I am well aware of PG&E being a former California resident and having lived in the state in the 90's when PG&E got nailed for the contamination they caused when they settled for a record amount at the time. Lately, the obvious increased chatter going on about the stock and potential liability issues with the fires had me take a look. Actually, the stock is only down 38% since the news was announced ($69.15 down to it's current share price of $44.39). Due to California being one of the only states where courts have applied inverse condemnation liability to events caused by a public utility's equipment, the risk was built well into owning the stock long before the recent wildfires.

Sidestepping the issue of what the state of California is doing to itself with regard to public utilities and what many conclude as the need for reform if the state is going to continue to use and need public utilities - the cause of the fires has still not been determined outside of the known issue of how it spreads with the winds, and dry conditions from drought. It was a terrible year for fires in the state last year.

Such a history of court applications in California has kept many institutions well away from investing in PG&E for years and years and years in spite of all the other attributes as a result. Point being, there usually is always a list of reasons for or against individual stocks of companies that an investor putting capital to work must thoroughly explore. If anything, the PG&E example simply builds a case for the simplicity of index fund investing because no work or thought is required to know any laws, or worry about risk of those laws being used against any single company, etc... .

Even if PG&E is determined not to be liable, the dividend is reinstated, and the stock climbs back to match its fundamentals - it still is not attractive to me as an investment until the state of California introduces reforms to change the current laws. There are other public utility companies in other states that also include natural disaster weather events that do not face such application of law in said events that would be considered to have much less risk than PG&E.

That being said - our household is not anti-index fund by any stretch of the imagination, nor are we anti-individual stock by any stretch of the imagination. Now, if the OP had mentioned owning shares of a losing company with a bad balance sheet, poor management, and miscalculated business decisions in an industry with little to no prospects for performance to at least match the market in the years going forward - I would have joined the chorus of sell your stock, pay the taxes, consolidate the gains into the total stock market index fund and move on.

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Re: Sell Home Depot?

Post by miamivice » Sun Jan 21, 2018 9:17 pm

CyclingDuo,

If you truly are a great stock picker, and know that Home Depot is a better stock than PG&E, Enron, Washington Mutual, Kodak, or any of a large contingent of companies, then I would invite you to become a fund manager and create an actively managed fund. You will do far better than the professionals, who do no better than passive index investing.

I personally cannot tell whether Home Depot will be a great stock or tank in the next few months. Nor did I realize last spring that PG&E would tank due to wildfires.

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Re: Sell Home Depot?

Post by drk » Sun Jan 21, 2018 10:01 pm

KPG wrote:
Wed Jan 17, 2018 2:42 pm
I know bogleheads don't like individual stocks. I have been trying to consolidate my portfolio for years now, but the capital gains are killing me. Sell HD or do Roth conversion? Bought 200 shares of HD in 2000 for $9837. Dividend total to 12-31-2017 was $3965. Today HD is about $199. a share, which would be about $39800. Did some research, HD very good stock, probably won't split, dividend probably will go up, projected share price keeps going up. Any comments, insight or suggestions are very much appreciated.
Thanks, KPG
KPG wrote:
Thu Jan 18, 2018 10:10 pm
Thanks to everyone who answered my post. I value all opinions. HD is about 1.9% of my portfolio and I think I am going to hold onto it for now. KPG
I see nothing wrong with this. Keeping 5% of one's portfolio for stock picking offers a way to avoid more destructive behaviors with the portfolio as a whole. It's only a problem if seeing winners in that 5% makes you bump up your allocation to 10% and so on. If you still believe in HD as a company, keep it.

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Re: Sell Home Depot?

Post by HomerJ » Mon Jan 22, 2018 5:21 pm

CyclingDuo wrote:
Sun Jan 21, 2018 11:30 am
Now, if the OP had mentioned owning shares of a losing company with a bad balance sheet, poor management, and miscalculated business decisions in an industry with little to no prospects for performance to at least match the market in the years going forward - I would have joined the chorus of sell your stock, pay the taxes, consolidate the gains into the total stock market index fund and move on.
Ah, so it's okay to own individual stocks as long as you just own the good ones.

Great advice. :oops:

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