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SunTrust (STI) moves to shore up its balance sheet by selling its stake in Coca-Cola (KO),...
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Thursday, September 6, 2012, 5:40 PM ETSunTrust (STI) moves to shore up its balance sheet by selling its stake in Coca-Cola (KO), generating a $1.9B pre-tax gain. The bank will record about $375M in mortgage repurchase provisions during Q3, increasing mortgage repurchase reserves to levels sufficient to cover the remaining loan demands sold to GSE's prior to 2009. Shares +3.2% AH. (PR)
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This news story has 4 comments:
Haha! Good one - $250 billion in charges for $3 billion in loans...
No, the loan-related charges according to Reuters are $350 Million.
They are hopeless............ Sell........
Do you tend to get emotionally attached to stocks? How does the length of time they held the stock enter the equation of when to sell? What's wrong with selling a stock when it is overvalued?
You seem to base your investment decisions on romanticizing stock ownership, not rational valuation. Good luck with that.
KO is not overvalued. Historically the PE has been @ 20 and that is where it currently is. Can the P/E go to 17? Maybe. But since it is kicking the crap out of Pepsi, I don't see any reason at this time to sell a stock that also has a deep moat, a solid if not outstanding balance sheet, gaining market share while improving their margins, expanding in the ROW, solid organic growth, a steady increaser of the dividend and excellent or very good upper management.
Another reason to hold onto the KO is if you are a dividend investor that reinvests (moi) or one of those that relies on dividend income as part of their retirement income (also moi) even when KO's growth is in the high single digits and the P/E is @ twice the growth. Why? Because the beta is @ .40 or very slightly higher. In other words, I'm not going to lose on KO in the long run unless they opt to do something drastically stupid in the short or mid term; and if they do I will sell. That can also be said of other stocks but KO is one of the best examples out there why to buy, hold, and take some profits but keep the core investment at a minimum.
I sell dividend or other stocks when I have a reason to, such as P&G. They are losing market share almost everywhere across the globe, their margins are shrinking, the CEO is at best average, the dividend payout exceeds 55%, no growth or very limited organic growth potential, a company that foolishly raised its dividend a couple of months ago when they were losing business, and the competition is a better value. I realize Mr. Ackerman disagrees with me but that is what creates markets. He also invested a big chunk of money in JCP and thus far that investment hasn't worked out to well for him but is also early in the game.
If you can suggest a reason to sell KO, I'm glad to hear it besides the alleged overvalue or profit taking. As I mentioned earlier value is in the eye of seller and buyer. In other words, provide a reason or reasons that are not tied strictly to price.
When I say the stock is up HUGE from where SunTrust bought it, I still affirm that is no reason to sell the stock unless you strictly want to take some profits. SunTrust bank, per the lead paragraph, sold to shore up their balance sheet. If I was in their position, I probably would've done the same thing - fortunately, I'm not. My suggestion, therefore to sell SunTrust is because the banking business is slowly but surely getting better so unless management has dropped the ball AGAIN, there is no reason to sell ALL of their shares in KO.
FYI: I have also taken some profits on AAPL, AMT, MCD, DRI, CAT, VF Corp and others. I have also lost on Southern Copper, TRN, sold CRUS too early, TRN, WWD, and others. With this in mind, I don't romanticize about stocks.