Thinking About Selling Some Stocks

Fog rolling in during hike

Well, back to work today.  I did enjoy my mini-getaway here in Montreux.  Yesterday I hiked to Les Avants from Chamy.  While it was supposed to be 90 minutes, I took 2 1/2 hours as I missed it and ended up in another village further up.

I am sitting on my balcony, blogging while enjoying a fresh croissant and a cup of cappuccino.  I can not explain it, but Europeans just make better coffee.  I think while we were figuring out how to build a rocket to the moon and build the space shuttle, they were perfecting coffee.

I was looking over my dividend portfolio last night (shown below):

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
BHK	2,994	12.59	14.98	2,466	25.5%	3.3%	22.2%
CPL	1,530	22.61	23.19	877	5.1%	14.2%	-9.1%
CSCO	4,230	17.19	16.35	825	-3.8%	3.7%	-7.5%
CSQ	5,293	8.22	9.96	3,368	29.0%	18.9%	10.1%
ENH	2,000	34.80	35.84	-	3.0%	1.5%	1.5%
FCX	1,021	37.55	33.50	749	-8.8%	7.7%	-16.5%
FSC	2,677	9.78	10.41	755	9.3%	1.8%	7.5%
HFC	1,069	33.80	38.41	1,117	16.7%	0.4%	16.3%
INTC	1,291	19.69	26.23	1,559	39.4%	20.8%	18.6%
JPM	1,661	35.18	36.09	494	3.4%	3.6%	-0.2%
JQC	4,717	8.86	9.43	3,736	15.4%	5.7%	9.6%
KMF	1,817	21.86	27.70	2,847	33.9%	15.1%	18.7%
KSS	909	47.61	51.11	289	8.0%	3.2%	4.8%
KSW	13,673	3.78	3.77	6,633	12.6%	18.1%	-5.5%
LNC	2,442	24.30	22.03	789	-8.0%	13.3%	-21.3%
MPC	575	43.84	49.39	142	13.2%	1.3%	11.9%
MSFT	959	26.80	29.75	1,036	15.0%	12.7%	2.4%
O	546	18.93	41.41	7,048	186.9%	65.2%	121.6%
OIBAX	3,837	4.90	6.48	6,273	65.7%	64.6%	1.1%
PGR	2,000	20.48	19.57	-	-4.4%	2.1%	-6.5%
PM	444	46.38	91.93	2,621	111.0%	28.2%	82.8%
PRE	1,023	61.86	72.93	1,552	20.3%	7.8%	12.5%
PVD	417	64.11	88.00	2,737	47.5%	15.3%	32.2%
SAI	3,927	13.05	11.69	821	-8.8%	-1.9%	-7.0%
SBS	857	40.65	85.20	4,441	122.4%	20.4%	102.0%
STO	1,040	23.82	24.35	1,121	6.8%	17.0%	-10.2%
TROX	2,021	24.14	24.31	500	1.7%	1.8%	-0.1%
VIVHY	2,896	17.01	19.04	4,841	21.8%	0.3%	21.5%
WBK	508	105.89	125.00	6,166	29.5%	13.1%	16.5%
XOM	223	52.56	87.55	1,084	75.8%	19.3%	56.5%
Total Open				66,888	19.2%	9.7%	9.5%
Closed					6.1%	7.5%	-1.4%
Combined					11.7%	8.4%	3.3%
IRR Since 12/31/10					12.8%
2012 Gain					13.9%

While it has performed great, I do wonder if/when it makes sense to prune it a bit.  There are a couple of dynamics (in my mind) that could impact the portfolio.

• The fiscal tax cliff - right now dividend income gets favorable tax treatment (as opposed to ordinary income).  Not sure what will happen in DC, but it seems VERY likely to me that dividend income tax rates will rise.  That will make dividend stocks less attractive to own and there could be a correction.
• The Fiscal Tax Cliff (part deux) - I also have some stocks with out-sized long-term capital gains.  Those also receive favorable tax treatment that is very likely to be watered down or perhaps removed.
• Unsustainable Low Treasury Yields - I think treasury yields are the lowest they have ever been.  It is likely that they will remain low until at least 2014 (unless our economy starts firing on all cylinders).  While I do not own treasuries (outright) in my portfolio, there is clearly a correlation between treasury prices (they go higher as yields drop) and my Closed End Fund bond holdings (JQC and BHK). It is telling that they are up 15% and 25% since I bought them a year ago.  That will recede when treasuries finally go up again.

On top of these macro trends, I also have some individual stocks that feel like they are getting a bit pricey.  Besides the bond funds, PM is trading at 18x earnings. SBS is 13x trailing earnings.

Not sure what I will do, but I may sell entire PM and BHK positions. I will also think about selling ENH (which is more of a short-term holding as I am overweight in that sector).  These three sales would be about 12% of my overall portfolio.  It is funny though, I emotionally do not want to sell.  Perhaps that is an indicator that I should sell.