At the end of 2021, I unceremoniously dumped my shares of AbbVie (ABBV -0.59%) stock, which were worth a grand total of around $2,095, marking a total return of 40% on top of what I had initially invested 13 months prior.
While I'm certainly quite glad that I picked up a decent return in a very short period, I admit today that selling was a mistake, and I probably shouldn't have sold my shares. If I'd simply held on, I'd be looking at a total return of 76% today -- and I'm fairly certain I'd see my shares rise even more if I kept holding.
So, here are three reasons why I regret selling AbbVie stock, other than the most obvious reason that I'd be seeing my investment grow even more if I'd held.
1. My reason for selling wasn't well thought out
The biggest reason why I regret selling AbbVie is that I didn't sell it for the right reasons.
I was scared that when its money-printing arthritis drug Humira lost its patent exclusivity in 2023, the company's share price would collapse promptly, along with its top and bottom lines. While at the time of my sale I understood that management had a plan to eventually replace the revenue that it expected to lose from the decline of Humira this year, I didn't entirely understand how that plan was going to work in practice, which made it hard for me to have confidence in the stock.
In a nutshell, management's idea was to develop two immunology medicines, Rinvoq and Skyrizi, to replace Humira's sales by competing in the same markets as it did. So far, AbbVie has successfully secured approvals for most of the same indications that Humira had, spread across those two new medicines.
And while their combined revenue isn't yet as much as Humira, over a long-enough period the peak revenue from their sales could actually eclipse it, with management anticipating more than $21 billion in sales of the pair in 2027. The biggest risk is that their combined revenue will fail to ramp up to reach Humira's level before the top line shrinks again as a result of losing exclusivity protections for other major revenue drivers.
But so far, the plan appears to be working. On a reported basis in Q4 2022, Skyrizi saw its sales jump 76% year over year, whereas Rinvoq's revenue increased by 49%. If I had accepted the fact that the risk posed by Humira's loss would take a while to recede, I probably wouldn't have sold because I'd have been more patient.
2. Selling means missing out on dividend income
When I sold my shares of AbbVie, my shares were realizing a dividend yield of around 4.5% on my cost basis annually. Now, its forward yield is a mere 3.7%, as its share price has continued to grow. At the same time, its dividend has also continued to grow.
So by selling my shares, I've been missing out on what could have become a tidy and growing income stream, and buying back into the stock now can't really make up for that because its yield today is lower.
The beauty of dividend stocks is that their price does not need to rise for shareholders to keep getting paid. The thorn in the rose is that dividend stocks often see their shares appreciate more slowly than growth stocks, or other companies that retain their excess earnings for reinvestment rather than distributing them.
When I sold, I believed that I'd make more money by investing in one of those faster-expanding businesses that don't pay a dividend. As it turns out, AbbVie grew plenty, so I didn't get the benefit of the dividends, nor did I get to see my shares rise in value.
3. I didn't hold my shares long enough to prove or disprove my investing thesis
My final regret with selling AbbVie is that in retrospect, I didn't really sell it because my investing thesis had been refuted. I actually hadn't held it for long enough to even see whether my investing thesis had merit -- and that was a problem.
The whole point of maintaining an investing thesis about a stock's merit is that it guides your investing process and orients it around certain facts that are grounded in reality. If those facts change or if you got the facts wrong, it can be worth reevaluating whether your thesis is still true, and whether you should continue to hold the investment or look elsewhere. But if you're investing for the long term (and you should be), your investing theses need to be similarly oriented time-wise.
In other words, if you thought AbbVie was going to be able to keep profitably developing and commercializing new medicines for years to come when you invested, it wouldn't make much sense to sell if you hadn't waited long enough to see if your thesis was sound. And that's what I did -- hence the regrets.
While only a couple of years have passed since my sale, from the perspective of today, my initial investing thesis about the stock was correct. But I didn't have the conviction to hold my shares despite my fears about Humira.
The takeaway here is that you should try to make your investing theses as specific as possible with regard to how long you should wait before calling it quits on a stock, assuming that the facts could still develop favorably, as there's a high risk of bugging out prematurely.
