The old stock market saying instructs us to sell in May and go away. While I’m not a huge believer in this, there are a couple of UK shares that I’d offload from my portfolio if I were having a spring clean.
In general, I look to concentrate on the best investment opportunities I can find. And sometimes that means replacing less attractive stocks with ones where the returns look more promising.
Legal & General
Any stock with a dividend yield close to 9% is obviously attractive. And I’ve owned Legal & General (LSE:LGEN) shares in my portfolio, but the stock isn’t for me at the moment.
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When it comes to investing, Warren Buffett says that risk comes from not knowing what you’re doing. And when it comes to the bulk annuities business, I probably don’t have any unique insight.
Annuities contracts have long durations, meaning it’s a long time until how profitable they will be becomes clear. And there’s also a risk of inflation – as prices rise, payouts become more expensive.
More specifically, I don’t have a sense of what Legal & General’s distinct advantage is when it comes to insuring annuities. It might have one, but it’s beyond my ability to evaluate confidently.
Something similar is true of the life insurance industry. And with these two divisions making up around two-thirds of the company’s revenues, this isn’t a stock for me.
That’s why I decided to sell my investment in Legal & General shares a while ago. And despite the attractive dividend, I’d look to do the same today with other opportunities available.
Darktrace
Shares in Darktrace (LSE:DARK) rose 25% last week as US private equity firm Thoma Bravo agreed a deal to buy the company. That’s probably good news for shareholders, but I’d also be looking to sell here.
Current investors stand to receive $7.75 in cash at the end of the year for each Darktrace share they own. That’s equivalent to £6.19 at today’s rates.
With the stock currently at £6.04 per share, I don’t think waiting until the end of the year for a 2.5% return when the deal closes is particularly attractive. So I’d look to sell the stock and move on.
There’s a chance investors could do better than this if the value of the pound weakens substantially against the dollar. But there are a couple of things worth noting here.
The first is that things could go the other way, causing returns to be worse. Another is that if I was able to predict a currency shift confidently, I’d have better ways of betting on this.
I think it’s hard to see how investors make much more than £6.19 from owning Darktrace shares. So if I owned the stock, I’d sell it today at £6.04 and buy something else for long-term returns.
Selling in May?
I’m not a fan of the idea of selling in May and going away. But sometimes my view on a company can shift, or the business itself can change significantly.
When I see a better opportunity, I’m not averse to moving on from an investment I own. When I do, though, it’s to buy more shares, not splash out on a holiday! Over the long term, I want to be invested in the stock market.
