Monday, July 18, 2016

Recent Sell: American Electric Power (AEP)

This is somewhat of an infrequent occurrence for me, but at some point you have to put your "money where your mouth is" I suppose and act.  I've been saying a lot recently that many dividend-paying stocks are becoming overvalued, and if I truly believe that, then I should make decisions based on that premise and ACT.

As such, this post will detail my recent sell of American Electric Power (AEP). Though I rarely ever sell the stocks I purchase anymore, when I achieve a very nice return and then also believe that that particular stock is overvalued, I will in fact sell and look for better opportunity elsewhere.  Again, this is a rare occurrence, but it does happen.  Thanks fully I achieved an annualized return of 17.99% from this investment.

In this case, I had purchased AEP back in MARCH 2015 for $55.57 a share.  It was a smaller position, about 2.5% of my portfolio, but I thought the company was solid and that the stock was undervalued at the time.

A little over a year later, I decided to sell at $69.29.  Therefore, with dividends and after fees my total return was 24.2%.  This is an annualized return of 17.99%, which I am very happy about.

SIDE NOTE (and an important one) - It is always easy to share your successes! I've had plenty of failures, trust me, and I intend to share those going forward as well.  This was simply my first portfolio action since Passive Income Dude was created. 

This was just a small position in my portfolio, but it always feels good to sell something for more than you paid for it! That's the goal, right?

AEP is a great company, and I will definitely watch their stock movement in the future; I simply thought it was overvalued at current prices and wanted to have capital ready for a better opportunity.  Morningstar has a fair value for AEP at $61.00, and the $69 range is about 15% overvalued at that point.

What do you think? Did I make the right decision? And what should I do with the capital?

Thanks for reading!

Passive Income Dude

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