A Stocks and Shares ISA gives investors the opportunity to sell investments without capital gains tax. I generally prefer to hold on to the assets I own, but sometimes moving on can be the right thing.
One reason for selling shares is to take advantage of an unusually good opportunity elsewhere. When this happens, the question for an investor is how to figure out which stocks to sell.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Buying opportunities
As a rule, I don’t buy stocks with a view to selling them again. But last year, an opportunity presented itself that meant I had to make an exception.
In August 2023, interest rates in the UK reached 5.25%. This had a big impact on the property market, with prices coming down as borrowing costs increased.
This caused shares in real estate investment trusts (REITs) to fall. And when the dividend yield reached 7.5%, I decided shares in Primary Health Properties were too cheap to ignore.
Unfortunately, I didn’t have as much cash around as I’d have liked. As a result, I decided to sell one of the investments in my ISA to take advantage of the opportunity I was seeing.
What to sell?
Deciding what to move on from wasn’t easy, but one stock I absolutely did not consider was Berkshire Hathaway (NYSE:BRK.B). It’s still the last investment I’d sell from my Stocks and Shares ISA.
The reason is relatively simple – as Warren Buffett says, the most important thing with investing is to avoid (permanently) losing money. And I think Berkshire is the stock I own that most aligns with this.
The company has around $277bn in cash on hand. And this helps mitigate the risk of the biggest potential threat to the business, which is a large insurance loss as a result of a natural disaster.
It’s impossible to prevent this kind of loss, but it is possible to prepare for it. And with stronger cash reserves than any other insurer, I think Berkshire Hathaway stands out in this regard.
Opportunities
Investing isn’t just about avoiding losses, though. It’s about finding businesses that have unusually good opportunities for future growth.
Berkshire’s financial position doesn’t just help reduce risk, though. It also gives its other subsidiaries – which include a utilities business – an important competitive advantage.
The transition to renewable energy is going to require expensive infrastructure. And I think that’s going to bring investment opportunities that can generate good returns.
Unlike other utilities businesses, Berkshire is unlikely to need debt to finance these projects. As a result, I expect the company’s cash to be an important asset when it comes to long-term growth.
Selling shares
I think Berkshire Hathaway is unique. Its capital structure is unlike that of any other insurance company and it’s extremely difficult for anyone else to build something similar.
That’s why I’m so reluctant to part with the shares I own. Even when the stock is overvalued, I think it would be almost impossible to find another investment with the same long-term prospects.
