Whether it comes down to valuation concerns, risk exposure, changes in strategy, or any other reason, there will be times when investors ought to consider selling all or part of their shareholding in a stock.
Airtel Africa
What it does: Airtel Africa operates mobile phone networks and a mobile money business across multiple markets in east and west Africa.
By Christopher Ruane. In March, shares in Airtel Africa (LSE: AAF) were selling for pennies. Within three months they had shot up in price over 33%. The long-term picture is solid too, with a five-year price gain of 69%.
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I continue to see large potential here. The company has a well-established business and sizeable customer base in markets where I see ongoing growth opportunities thanks to demographic and economic changes. The mobile money offering could be set for particularly strong growth in my view.
But a key risk – currency devaluation in emerging markets – continues to dog the firm. Last year saw revenues in the reporting currency (US dollars) fall, while a $750m profit the prior year gave way to an $89m loss.
The company has done well battling a chaotic currency situation in Nigeria and I still believe in its long-term potential. But I decided to act on the price rise and take some risk out of my portfolio.
Christopher Ruane does not own shares in Airtel Africa.
dotDigital
What it does: dotDigital is a technology company that offers digital marketing software.
By Edward Sheldon, CFA. Recently, I had a bit of a portfolio cleanout and dotDigital (LSE: DOTD) was one stock I offloaded.
Why did I choose to sell this particular stock? Well, there were a few reasons.
The main reason was simply that it had become a really small position (less than 1%) in my portfolio. So, it wasn’t likely to have much of an impact on my overall returns going forward.
Of course, I could have added to my position. But I decided that it was no longer one of my best ideas, so my view was that I was better off selling it and freeing up some cash for other investment opportunities.
As for why it’s no longer one of my best ideas, I’m a little concerned that generative artificial intelligence (AI) could disrupt the company’s business model. This wasn’t a major risk when I first bought the stock around a decade ago.
Now, knowing my luck, the shares will soar from here. I still think they have plenty of potential. The company could even be a takeover target.
I’m seeing a lot of other exciting opportunities in the market, however. So, the cash from this sale is likely to come in handy in the months ahead.
Edward Sheldon has no position in any shares mentioned.
Nike
What it does: Nike is the world’s largest sportswear brand.
By Ben McPoland. I sold my shares in Nike (NYSE: NKE) earlier this summer. Thankfully it was before the firm’s fiscal fourth-quarter results, which sent the stock down 20% – its biggest ever one-day drop.
The company is suffering from slowing sales due to weak consumer demand. For FY25 (which has just started), it’s forecasting a mid-single-digit decline in revenue. Its China business remains tepid while sales of its Converse brand slumped 18% during the quarter.
My fear here is that Nike’s best days may be in the rear-view mirror. A lack of product innovation suggests it’s not the same beast that saw off the challenges of Under Armour and others in years gone by. A whole raft of competitors, from Lululemon to Hoka and New Balance, are appealing to consumers and stealing market share.
Nike is rolling out new $100-and-under trainers around the world to try and get sales back on track, so perhaps this can help. However, there seems very little to be excited about, while the stock isn’t particularly cheap at 23 times forward earnings.
I see more attractive opportunities elsewhere.
Ben McPoland does not own shares of any company mentioned.
Nvidia
What it does: Nvidia is an artificial intelligence company best known for producing graphics processing units.
By Charlie Keough. I recently felt it was the right time to lock in some of the profits I’d made from Nvidia (NASDAQ: NVDA).
Although I still own some shares, after rising 160.1% in the last 12 months, I’m cautious that the stock could be overvalued right now.
Firstly, it currently trades on 70.7 times earnings, way above the S&P 500 average of 23. Furthermore, its price-to-sales ratio is 39.5.
Those sorts of readings could prompt a share price correction. While the stock has been soaring, I’m worried we could see its share price recoil at the first sign of a slowdown in growth.
I’m in no rush to offload the remaining shares I own. I’m bullish on Nvidia for the long run. The artificial intelligence sector will continue to expand and Nvidia is a major player in the space.
But I think it’s a smart move to take some of the money I’ve made and reinvest it elsewhere. If its share price takes a tumble, maybe at that point I’ll reconsider buying some more stock at a cheaper price.
Charlie Keough owns shares in Nvidia.
Spire Healthcare Group
What it does: Spire Healthcare Group runs 39 hospitals and over 50 clinics, medical centres and consulting rooms in the UK.
Private healthcare group Spire Healthcare Group’s (LSE:SPI) has fallen sharply since 22 May. On this date, Conservative prime minister Rishi Sunak shocked the nation by announcing a general election in early July.
Why was this significant? At that time, Labour had a gigantic lead in the polls, one which it maintained up to polling day. So expectations of Keir Starmer imminently entering Downing Street and shaking up the NHS spooked investors.
Strain on the public healthcare system has driven revenues sharply higher at Spire in recent years. They rose 13.4% in 2023 as patients used private medical insurance or self-paid to sidestep long NHS waiting times.
Look, there’s no guarantee that the NHS will improve immeasurably following Labour’s victory. Parties often break manifesto pledges. What’s more, overall NHS service levels may remain poor as the UK’s elderly population rapidly grows. Either scenario could continue to support the private healthcare sector.
However, I sold just over half of my Spire Healthcare shares (which I’d held since mid-2022) in response to this fresh risk. And I’ve subsequently reinvested my profits elsewhere to rebalance my portfolio.
Royston Wild owns shares in Spire Healthcare Group.
