Why I’m Glad I Sold Tesco PLC, Vodafone Group plc And GlaxoSmithKline plc, And Why I’m Tempted To Buy Them Again

The decision to sell a stock is just as tough as the decision to buy one. I am still cursing my decision to sell microchip manufacturer ARM Holdings, only to watch its value subsequently quadruple.

That was my worst ‘sell’ error, but by no means the last.

So I’m delighted to see the three stocks I have offloaded over the past year have suffered ever since, plunging by up to 25% since I dumped them.

In fact, they’ve done so badly, I’m tempted to buy them back again.

Ta Ta, Tesco

TescoI sold beleaguered supermarket giant Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) in March for 326p, banking a small profit on my original purchase. I put a lot of thought into the decision, and I’m glad I called it right.

I was disappointed by Tesco’s failure to establish itself in the US, following the ‘Fresh & Easy’ debacle. With reversals in Korea and Thailand as well, I suspected Tesco had overreached.

At home, customers were also complaining about staff, stores, produce and prices, and openly confessing they preferred to shop at budget rivals Aldi and Lidl instead.

I feared Tesco’s size and scale was now working against it. This week’s news that the big supermarkets are ditching plans to build new megastores is vindication.

Ultimately, it’s the fact that Tesco’s share price has since plummeted to just 245p (and is still falling) that proves I was right to sell. I have spared myself a 25% share price plummet.

Auf Wiedersehen, Vodafone

vodIt’s never wrong to bank a profit, the saying goes, and I doubled my money in the five years I held Vodafone Group (LSE: VOD) (NYSE: VOD.US). 

Having offloaded its prize asset, Verizon Wireless, I suspected future performance might be somewhat anticlimactic, and I was right. I sold in March at 229p. If I bought Vodafone today, I would pay just 198p, or 13.5% less.

I was nervous that Vodafone would blow its Verizon windfall. Its £7 million Project Spring transformation programme certainly looked costly.

Another concern was that so much stuff is given away as freebies these days, particularly messaging services and apps, that Vodafone could struggle to monetise its offering.

Its exposure to a retrenching Europe also made me edgy.

Goodbye, Glaxo

GlaxoSmithKlineI was clearly feeling nervous about market prospects in March, because I also offloaded another long-term hold, pharma giant GlaxoSmithKline (LSE: GSK).

The Chinese bribery scandals had already been aired, and I feared they might intensify, as scandals have a habit of doing. And that’s exactly what has happened.

Flat earnings growth in 2012 and 2013, expiring drug patents, and sheer boredom also enticed me to sell. If I wanted something this dull, I might as well play safe and buy a FTSE 100 tracker, I thought.

So that’s what I did, selling at a price of 1,650p.

A little over four months later, it trades at 1,411p, a discount of 15%.

I Want You Back

All three stocks look more tempting at today’s prices. Tesco is now available at 7.8 times earnings, Vodafone at 11.2 times and Glaxo at 12.9 times. They yield 5.9%, 5.6% and 5.4% respectively.

The concerns I felt back in March haven’t gone away, but they are reflected in the new lower prices. And those yields are almost too juicy to miss.

The decision to buy is looking almost as straightforward as my decision to sell. Let’s hope it is as successful.

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Harvey Jones has no position in any shares mentioned. The Motley Fool has recommended GlaxoSmithKline and Vodafone. The Motley Fool owns shares of Tesco.