2020 was an active year for me as an investor. Throughout the year, I bought and sold quite a few stocks for my portfolio.
Here, I’m going to highlight three FTSE 100 stocks I sold from my portfolio in 2020. I offloaded these underperformers to focus more on my best ideas.
This FTSE 100 stock has struggled
Advertising giant WPP (LSE: WPP) was one FTSE 100 stock I got rid of in 2020.
When I bought WPP shares back in 2017, there were a number of things I liked about the company. Firstly, it had excellent long-term growth and dividend track records. Even during the Global Financial Crisis, revenues rose. Secondly, it had an inspirational leader, Martin Sorrell, at the helm.
Since then, a few things have changed. Firstly, the company has really struggled due to structural changes in the advertising market (which I underestimated). I think it may continue to struggle for a while. Secondly, Sorell has left the firm. Third, WPP slashed its dividend payout this year.
In light of these changes, I asked myself: ‘would I buy this stock today?’ The answer was no. So, I sold it.
Dividend cut
Another FTSE 100 company I offloaded was tobacco giant Imperial Brands (LSE: IMB).
I bought this stock back in 2017 mainly for the dividend. The yield was attractive and the dividend growth track record was impressive. I also liked the fact that portfolio manager Neil Woodford – who still had a good reputation at the time – was backing the stock heavily.
Since then, a lot has changed. Firstly, Imperial’s dividend growth track record is gone. This year, it slashed its payout.
Secondly, sustainability has become far more of a focus since 2017. These days, nearly all institutional investors are turning to their attention to sustainable investment strategies and avoiding sectors such as tobacco. This means that, going forward, FTSE 100 tobacco stocks may not generate the same kind of interest from institutional investors as they did in the past. This could keep Imperial Brands’ share price depressed.
I took a sizeable loss here but learned (or was reminded of) some good lessons:
-
It’s much easier to profit from companies benefiting from structural growth trends than companies facing structural growth challenges.
-
Buying a stock for its big dividend is generally not a smart move.
-
Even the best fund managers get it wrong at times (often very badly).
No competitive advantage
Finally, I also dumped my shares in FTSE 100 insurance company Aviva (LSE: AV).
This was a share I held for about seven years, thinking it offered value. It never really performed for me though. For a while, the dividend yield was attractive. But overall, returns were disappointing. After it cut its dividend this year, I made the decision to sell it.
I think one of the main problems with Aviva is its lack of edge. It doesn’t have a competitive advantage. There’s nothing to stop a customer going to a competitor.
I’ll point out that new CEO Amanda Blanc is looking to transform the company. She’s confident that she can turn it into a “winner”. However, we’ve seen this kind of thing before with Aviva and the company has failed to deliver.
Overall, I decided there were better stocks to own for the long term.
