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When I make an investment in my Stocks and Shares ISA, I do so with a long-term horizon. That’s five years, or ideally much longer.
However, that doesn’t mean I blindly hold onto shares, come what may. I will exit a holding if my investment thesis is broken. Or I see better potential opportunities elsewhere.
With this in mind, here are three stocks I recently sold, and why.
A pleasant surprise
The first was British American Tobacco (LSE:BATS). I was surprised when I found myself attracted to this FTSE 100 dividend share early last year. I’d never owned a tobacco stock before, due to falling cigarette volumes.
However, the stock just looked ridiculously cheap to me. In April 2024, I wrote: “We’re looking at a forward price-to-earnings (P/E) of 6.4, with a forecast dividend yield of 10.1%… to me, this high-yield FTSE 100 dividend stock offers exceptional value.”
I’m glad I embraced the risk, as the stock has since returned nearly 80%. And that’s before the juicy dividends!
Obviously, a starting dividend yield of 10%’s fantastic. So why sell? The same risk as above really, which is that cigarette volumes are set to continue shrinking, while there’s evidence GLP-1 weight-loss drugs are helping reduce nicotine cravings.
Plus, with the forward P/E ratio near 12, I feel the stock’s now more fully valued. So I decided to bank the gains and invest elsewhere.
An odd decision?
Another stock I sold was Oddity Tech (NASDAQ:ODD). This is a beauty/wellness company that uses artificial intelligence (AI) to build digital-first brands, most notably Il Makiage (make-up) and SpoiledChild (personal care/supplements).
The company recently beat Q2 revenue and profit estimates. And it raised full-year revenue guidance to as much as $804m, from $790m-$798m previously.
CEO Oran Holtzman struck a bullish tone: “Our business is growing with high profitability, multiple engines, and long runways.”
Oddity is a disruptor in the massive beauty industry and still has a small $3.3bn market-cap. The stock’s done well since I started a small position last year, rising 37%.
Unfortunately, I’ve noticed that some customers have complained online that Oddity’s brands attract them with trial offers, before rolling them into auto-renewing subscriptions that are difficult to cancel. A short-seller report also mentioned this last year.
Now, the company disputes this, saying its subscriptions are opt‑in and easy to cancel. Be that as it may, I was finding it hard to build conviction with this issue lurking at the back of my mind.
So while accepting I may come to rue my decision if Oddity becomes the real deal, I decided to sell my shares.
The final stock was Toast, which operates an all-in-one cloud platform for payments and online ordering for restaurants. Unfortunately, a lot of US restaurants are suddenly reporting very weak sales.
Is this just temporary consumer spending pressures? GLP-1s again? Or both of these things? I have no idea, but I fear it may suddenly harm Toast’s growth trajectory, so I exited my position.
Cash at hand
Another reason for selling a handful of shares was that I wanted some dry powder. Markets are at record highs and a lot of valuations look stretched. If there’s a sell-off this year, I’ll now have cash spare, ready to take advantage.
