As a fully signed-up Fool, selling stocks is not something I do without an awful lot of thought. However, I’ve recently decided to pull the plug on one FTSE 250 stock in my Stocks and Shares ISA.
Tough decision
The company in question is Moneysupermarket.com owner MONY Group (LSE: MONY).
This decision wasn’t easy. After all, the shares currently change hands on a forward price-to-earnings (P/E) ratio of just 11. That valuation is a fair bit less than the average among FTSE stocks. But it also looks a screaming bargain when the firm’s quality metrics are taken into account.
Put simply, MONY consistently makes great returns on the money management feeds into the business. Due to being a pure online operator, margins are also sky-high and there’s little debt on the balance sheet.
The forecast dividend yield is worth mentioning too. As I type, this currently stands at 6.5%. That’s way above the average among UK-listed companies. I know I’ve enjoyed receiving that cash in the years I’ve owned my (small) stake.
Why I’ve sold up
MONY’s biggest issue, at least in my view, has been its sluggish growth. Reasons for this include being in a very crowded space and regulatory requirements. For example, energy providers are banned from offering cheaper deals to new customers until 2027, reducing the likelihood that consumers will switch accounts.
Consumer confidence is also low as inflation bubbles up. That’s not ideal given that marketing spend in businesses such as this is usually very high. Getting Dame Judi Dench in your TV adverts won’t be cheap!
All this has contributed to pushing the share price down by a quarter in the last five years. In comparison, the FTSE 250 index is up by 25%!
Another thing that doesn’t fill me with confidence is that many members of the board jettisoned large stakes back in April. My data provider suggests there’s been no director buying since.
If those with front-row seats aren’t snapping up the stock, why would investors follow suit?
Big mistake?
Of course, I don’t know where any company’s share price is going in the short term. Neither do those highly-paid boys and girls in the City. This means there’s a very real chance that my decision to sell could come back to bite me.
Evidence that the number of active users is going back up wouldn’t do any harm, especially if the company can capitalise by pushing more people to purchase multiple products (e.g., energy, insurance, loans).
A cheeky takeover bid while the price is low? I wouldn’t rule that out either. Plenty of UK companies are continuing to attract the attention of deep-pocketed suitors looking for a killer deal.
Here’s what I’m doing now
Only time will tell if I’ve made an absolute clanger of an investment decision. But instead of ruminating about what may/may not happen, I’m busy deciding what to do with the wad of cash I now have to put to work elsewhere.
But with markets seeming to become more detached from economic reality as every day passes, buying on a whim isn’t a strategy.
For now, I’m content to build a list of potential investments that I might pull the trigger on if the price is right.
