LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying, and buy when they're selling.
But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with an indication of investments that may be past their prime.
So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been selling in the past week or so, and what might have made them decide to do so.
Too much of a good thing?
Lloyds Banking Group (LSE: LLOY) (NYSE: LYG) has been a spectacular success over the 18 months or so -- now at just over 61 pence, its share price is up 180% since a low point in November 2011, when it dipped under 22 pence.
However, after its share price rose over 30% in less than a month, between mid-April and mid-May, some people may have decided that too much of a good thing can be risky, and at least top-sliced their holding, putting Lloyds in the No. 3 spot in the latest "Top Ten Sells" list*.
Lloyds' shares are now trading at about 12% above the company's tangible net asset value, which may make it seem worse value than competitors such as Barclays and Royal Bank of Scotland, both of which still trade at a discount to theirs. And Lloyds' forward P/E of 13 suggests that a lot of growth might already be priced into the company's current share price.
There are also concerns about what might happen when the government disposes of its 39% stake in the bank, now that Lloyds' share price has breached the so-called "break-even point" of 61 pence. (That's actually well below the average price of 73.6 pence per share that the government paid, but was the open-market value of the shares at the time of bail-out, which seems to be the Treasury's idiosyncratic measure of "break-even.") The sale of such a huge shareholding will have to be very carefully managed if it's not to adversely affect Lloyd's share price -- and we all know how good governments can be at managing things carefully.
There's also the spectre of another potential mis-selling scandal, with its attendant costs, currently haunting Lloyds. This time it could be mis-selling of interest-only mortgages that hits the bank's profitability. Whilst any claims may be less successful than in the case of PPI mis-selling -- because mortgage documentation was generally informative about the responsibility of customers to make adequate provision to repay the loan -- the value of individual claims could be very substantially higher, given the relative value of mortgages compared to PPI premiums.
And while it won't have influenced anyone's decision to sell last week, the news that Lloyds has admitted failings in its handling of PPI mis-selling complaints might not be terribly encouraging to prospective investors, as it suggests that the bank may not have put that particular problem quite as far behind it as investors might wish.
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*Based on aggregate data from The Motley Fool ShareDealing Service.