Insteel Industies – A Time to Sell

I have a tendency to hold a stock for a very long time. In my current portfolio I have stocks that I have owned for as few as 3 months and as long as 11+ years.

Just as making the decision to buy a stock can be hard, to me, making a decision to sell a stock can be equally as hard.

My name is Wax, and I am an individual investor, a working class investor, just trying to do the best I can with what I have.

As a working class investor, I don’t always have the luxury of reviewing every news alert for each company in the portfolio, nor do I have the time to review the quarterly filings of the companies in the portfolio.

I do follow the price movement of the stocks in the portfolio on a weekly basis, and I try, although I am not always successful, to update my worksheet for each of the stocks I own, on an annual basis.

It’s this annual update of my company worksheets that I use to highlight the status of a stock, with stocks under the 5 year holding mark generally getting a pass, and stocks at or over the 5 year holding mark being reconsidered.

Such is the case with Insteel Industries, Inc., a manufacturer of steel wire reinforcing products for the concrete construction industry. Simply put, they make rebar.

I liked this stock for the portfolio because I believed the company was in a good position to capitalize on many of the municipal infra-structure projects that were both upcoming and on-going, at that time.

Because I believed the company was in the right business at the right time, I added this stock to the portfolio in January of 2008, buying 1000 shares at $10.67.

It’s now 5 years later and the stock closed yesterday at $12.96, approximately 20% higher than when I bought it.

That may seem like nice a return, but in the end, the stock is just not performing.

Considering I have owned the stock for 5 years, that is roughly a 4% averaged annualized return and simply put, a return that size isn’t much help.

So it’s time for this one to go.

My order to sell has been placed as a market order, meaning where ever the markets price the stock, is the price I am willing to accept to sell the stock.

As I said, it isn’t a bad company, and it’s in a business I like. As the matter of fact, I think a reasonable value for the stock based on FY12 annual financial data is in the $25 to $28 range.

But the problem, at least as I see it, is that municipalities simply don’t have the tax revenues required to retire the bonds normally sold to pay for the kinds of projects which are the company’s business.

And that means, at least in my opinion, the probability that the stock price will stay between $11.00 and $13.00 for the foreseeable future is simply too great a risk for me to continue to hold the stock.


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