I sold EDF 3 weeks ago at €32.4 per share…. it was not an easy decision as I still think the company is worth in the region of €40. There are several reasons that led me to this decision:

• I am purchasing a property and I needed the cash – I think this is a valid reason for selling shares
• EDF’s share price was just not moving up

I feel I need to explain the second point in more detail as it is contrary to all principles of value investing. Let us start with a graph:

I purchased the share in June 2010 in what could be qualified as a low point. The shares were a good deal as the company – excluding debts – was worth close to €45. The reason for excluding debts – at the time – were based on the reasoning that the state-owned company would always satisfy its debtors and therefore teh debt was irrelevant. I can now see that this reasoning was slightly flawed.

Other the period that I have been holding EDF, the company has made many disclosures on the pay off of its debts and all looked rosy for the company going ahead. Similarly, the winter was harsh and the earnings were good, but none of this helped the company’s share price. Finally, the company struggled with its overseas expansions and its international growth and – I guess – Mr Market took this into account mroe than anything else.

My personal issue with a stock that does not move is that I am losing money on stocks that move i.e. if I had invested more money in Gecina instead of EDF, I would be better off. EDF did offer me some dividends and extra shares and I don’t think I lost any money holding this particular stock, but I certainly did not gain any.

The decision then came to this: I need cash for a real estate purchase and I need to part with some stocks: which ones shall I sell? Shall I sell the star performers that have done so well or shall I sell the udnerperformer that has not done so well. The literature on this subject os very disparate and I went with the reasoning of backing your star performer rather than holding on for deal life to the hope that your underperformer will recover.