Wednesday, March 23, 2011

Exelon, EXC - Income Investor Curse - Sentimentality

          Sentimentality can thwart even the most disciplined income investor.
  I was reminded of this as I booked a big dividend from a stock that I have loved but it is a stinker as far as price goes.How often do we hold onto to an investment because we think we love it?  After all, we picked it so it must be good.

          Who can blame us when we look at a holding that has had a great run and figure it will go even higher only to see it sink sometimes even below our cost basis.  But we loved it when the price was high should we not love it now that the price is low?

          Or how about this one, we inherit a holding that is a price stinker but we just couldn’t sell it because we inherited it; we love the memories it evokes.

          This has happened to me.  My dad’s inheritance included Exelon stock symbol EXC.  Look at the price history and you will see EXC reached $90.  I loved this stock.  He held it through thick and thin and so did I.  Luckily I reinvested the dividends and the number of shares has doubled since he gave me the stock.  My husband wanted me to sell it at $90 but I loved it.  It reminded me of dad and I would have owed a bunch of tax on the sale so I kept it.

          EXC had a brief rise again and I was so encouraged.   I loved it so much I gave some to my favorite niece.  Will she love it like I do?  Who knows?  Will it get back to $90, I hope so, but why do I keep it, because I love it for sentimental reasons.  You can love the dividend but you cannot love the stock price.  Now with pressure on nuclear energy, and since EXC is a utility that has lead in the nuclear arena, price pressure is significant.  

          For us income investors, EXC still pays big dividends.  Will I stick with it?  I will probably continue to own it because, well, I love it.  After all it is not $90 now so why sell it?  The pressure will come again when it goes back up to $90.  Will I have the smarts to sell it and put it into something else?  I’ll keep you posted.

Very Truly Yours,