Pulling the plug on individual shares: Selling Meridian Energy (MEL)
20 Jun, 2021
Well well well, the time has finally come for this long term investor to divest herself of some shares. Say what?! I claim to be a ‘buy and hold’ investor, so what gives? Have I fallen on hard times you ask, or maybe Jonny and I have retired at last?
Ah, thankfully, no and unfortunately, no not yet.
Before I discovered the world of ETF/index fund investing I had my radar tuned to ‘ways to invest’, but I honestly knew little to nothing about how to go about it - which I know that many people reading this can fully relate to. We were in our early 30’s then and Jonny and I had worked really hard and paid our house off in full. We knew we didn’t want the debt drama of a rental property, but we had cash beginning to build up in our bank account that needed a better and more permanent purpose than buying vehicles, taking overseas holidays and making endless trips to Bunnings. You can only DIY your whare so much.
I know this sounds like a first-world problem, but we really had no idea what else we could do with our money and I’m thankful that we at least had the good sense not to spend it all.
This freedom from paying a mortgage each month meant that when we had our daughter I could permanently stop work to hang out with her and while doing that I began to budget. Ish. We were able to live on Jonny’s salary alone and we inadvertently created a GAP between earning and spending meaning that we still had some money left over at the end of each month. I only learned later that creating this gap is the secret to becoming financially independent - aka spending less than you earn. We knew that there had to be a way to use this leftover money to grow our wealth in something other than a term deposit at the bank.
Enter John Key, Prime Minister of New Zealand between 2008 - 2016. His government decided to partially privatise many state-owned assets and one of them happened to be our own electricity provider, Meridian Energy. His classic statement was along the lines of that it would give “Mum and Dad investors a chance to get involved in the share market”. My ears pricked up and because the sale of 49% of Meridian Energy was well covered in the news I actually managed to get quite the education just by listening to it all unfold. There was a huge debate at the time about the pros and cons of the sale of state-owned assets.
Long story short, the partial privatisation of energy providers was going to happen anyway and although I recall that I found the process confusing, we decided to get involved and we stumped up some cash and became shareholders of Meridian Energy.
We paid $1.50 a share ($9,150 in total) in two instalments between October 2013 and May 2015, during which time I got to collect dividends for the first time in my life, which was a bit of a win as it gave me a taste of things to come. We ended up with 6100 shares in total. To give John Key credit, this exercise provided me with an excellent education in investing that I otherwise would not have received. There is nothing quite like putting some money down and riding it out.
It feels like far longer, but for almost seven years we have collected bi-annual dividends into our bank account that I have then reinvested into an ETF/index fund instead of buying more Meridian shares. I should say that ‘most’ of this money got reinvested, some would have been spent, but probably only about 10%.
This blog post has taken me a couple of weeks to write but the share price as at 10 June 2021 is now $5.400. Our $9,150 investment at this share price is now worth $32,940 plus it has returned us $10,374 (before tax) in dividends that were reinvested (or spent) elsewhere. The only way I know this is because I loaded this investment into Sharesight where it’s been tracking it for me over the last couple of years and it has kept track of every price change and every cent of income over the years, comparing it with the NZ Top 50. And I LIKE what it’s telling me, that this investment has provided a 27.74% return or a total return of $36,604 since we purchased it.
But...
You will know that since I learned about ETF/index fund investing I’ve had a bit of an issue with holding onto my one and only single stock, Meridian Energy. My one and only bumpy, volatile, all eggs in one basket stock. Every single time I’ve heard the words “Tiwai Point Aluminium Smelter” on the news I’ve inwardly groaned as I know that the share price would move up/down/sideways as a reaction to this news/any news. This happened again just this week when the government announced plans to incentivise us to buy electric cars, and what do electric cars need? Electricity. Meaning the share price wobbled again as a reaction to this news.
I feel that our Meridian shares are a little like the tenant phoning at 6pm to say they have an issue. They are always nagging away in the back of my mind and to be perfectly honest, I’m sick of it.
After John Key and the media began my education into investing, I didn’t stop learning. I, like many others I suspect, started to look for the ‘next Meridian’, another company with good prospects to buy into. Thankfully I worked out pretty quickly that I had little chance in doing so. Thankfully I discovered the less needy world of index investing.
With my other investments I’ve never had to worry, even when we had a share market crash in March 2020, I was not remotely worried. And having invested in ETFs/index funds for five years now, I’ve gotten mighty comfortable with not having to worry. My funds don’t cause me a moment of uncertainty, but these shares do.
So. It’s time.
After a fortnight of mucking about trying to time the market, I have sold all of my shares in Meridian Energy and I thought you might like to know how I did it.
My 6,100 shares were held with Computershare which is a share registry. When I googled “what does Computershare do” so I could tell you all about it, this was the search result:
“We gain unique insights from around the world, integrating best practice and innovative developments to strengthen our competitive advantage and deliver market leading solutions for high integrity data management, high volume transaction processing and reconciliations, payments and stakeholder engagement.”
An explanation which I thought was absolute fricking gibberish! Welcome to the world of investing! It’s gibberish like this that makes me write a common sense plain english blog called The Happy Saver. You are welcome!
I could have sold my 6,100 shares via their platform for a fee of $95 (!!!) on “the first $30,000” (I didn’t stick around long enough to find out how much they charge for amounts over that), but in all honesty I just could not be bothered working out how to as I knew it would be complicated and more expensive. Why? Because five years of using websites just like this one have proven it to be so and I personally don’t think they have designed themselves to appeal to a small investor like me.
So, I took the simple and less expensive route and logged into my Sharesies account and at no cost transferred all of those units from Computershare into my Sharesies account instead. It was extremely simple to do and in just a couple of days my Meridian shares showed up in Sharesies. I still held the shares, they were now just located in a different place.
To further test the system, now that my Meridian shares were located in my Sharesies account I did a ‘practice sale' where I sold 100 shares. I did a ‘market sell’ meaning that if someone was buying, I was selling to them, not waiting for a ‘limit order’ where I would set the price I was willing to let them sell for. Within ten minutes the sale was complete and the money was back in my Sharesies wallet. I paid a transaction fee of $2.69 for this market sell which showed as $538 (but after they took their fee out of this I ended up with $535.31 in my wallet) at a price per share of $5.380.
To test the system further I then withdrew that amount from my wallet into my own bank account. In case you are wondering, no there is no tax to pay from selling these shares, I’ve paid tax on my dividends as I’ve gone along and you don’t pay CGT (capital gains tax) on shares in New Zealand.
A waiting game…
After this wee test, it became a waiting game where I had about a three-week window to sell the remainder of my shares for the best price. The reason for the delay is that I’m planning on reinvesting this entire amount into my existing ETF investments and I’m doing that on the 20th of the month, so I had a little time to try to pick the ‘right time’ to sell and get the money back into our bank account.
And I have to say, trying to time the market SUCKS and takes up more of my energy than it really should! I’m not going to lie, it was a bit of fun too, but I don’t know how day traders do it, I seriously could not be bothered. I only paid such close attention I think because I wanted to blog about it for you.
Each day I noted the Meridian share price and the rough value of our investment based on the remaining 6000 shares:
26 May: $5.175 - $31,050
27 May: $5.215 - $31,290
28 May: $5.165 - $30,990
31 May: $5.230 - $31,380
1 June: $5.300 - $31,800
2 June: $5.379 - $32,274
3 June: $5.260 - $31,560
8 June: $5.375 - $32,250
9 June: $5.380 - $32,280
10 June: $5.375 - $32,250
11 June: $5.355 -$32,130
14 June: $5.340 - $32,040
15 June: $5.390 - $32,340 The Day I Sold
But some days I simply forgot and of course throughout the day the price fluctuates up and down anyway. Between the dates above there was a difference of $0.225 in the share price, which is a significant enough difference for me to take notice because it means a total value difference in my remaining 6000 shares of $1,372. To me that is a decent enough amount of money to spend a few days waiting around to see if I can get as much as I can.
But watching this fluctuation made it so darn hard to pull the trigger and sell. Too many ‘what if’s’ kept occurring to me.
So, it was time to ask myself a few questions:
Q. How much is enough Ruth?
A. You only paid $9,500 for them.
Q. How much can you be bothered checking in on this to pick the right day to sell?
A. My interest is waning already…
Q. If the price creeps up to $5.400 will you then wait till it hits $5.500?
A. I know I would be tempted…
Q. Ruth, if you ask yourself one year from today how much you got for these shares would you even remember?
A. No.
So, after my pep talk to myself (and Jonny) I took my own advice, which is to not hold individual company shares and I just made a decision to sell and then got on with it.
I just bit the bullet and SOLD…
Finally, on Tuesday 15th June I was following the Meridian Energy Limited (MEL) share price on the NZX and also on Sharesies where my stocks were held and watching the price change minute by minute. It was showing $5.390 on the NZX and due to the 20 minute delay, $5.340 on Sharesies. In the end and because I really do have better things to do with my day I just bit the bullet and at 10.30 in the morning, pressed SELL.
If you were wondering why I took so long to return your email this week, yep, this would be why! All this dithering takes time!
Then it was just a waiting game where I entered the queue of buy/sell orders and waited my turn to be matched up with those wanting to buy Meridian shares. As the time ticked by I watched the price drop on the NZX meaning that I really didn’t know how much we ended up selling for. Yet. And finally, 35 minutes later it was done and $31,976.20 was returned to my Sharesies wallet, broken up over 17 different market sells. Turns out no one was looking for exactly 6000 shares, so there were lots of smaller market sells ranging from just $5.33 to $13,336. When I looked at each transaction it all happened over a 16 minute period.
I immediately withdrew this money from my Sharesies wallet* and back in my bank account in readiness to be invested into my two Smartshares ETFs (FNZ and USF) on the 20th of the month. And I am already enjoying the fact that I’ve simplified my investment portfolio. The money was back in my bank account by 7pm that night. When you hear it said that “shares have more liquidity than housing”, this is what they mean, you can liquidate an asset extremely quickly if and when required.
* I like that I received a text alert that a withdrawal request has been made from my Sharesies wallet that I needed to confirm before it was actioned and the money sent to my bank.
We paid a total of $9,150 for these 6,100 shares about seven years ago. Today after selling them all and after paying a fee to Sharesies of $46.70 I have ended up with $32,511 which is a 255% increase in value. Plus they have returned us an additional $10,374 (before tax) in dividends over the time we have held them and during all this time those invested dividends have also been growing in value in the ETF funds that money is now in.
It’s been a good ride and I’ve learned a lot about investing thanks to Meridian Energy. As has been pointed out to me, yes, I could have held this stock as a type of ‘satellite investment’ or one which makes up a small portion of our total investments, but I didn’t even want to do that, I was over it. I hold a couple of these satellite investments already in which I invest small amounts weekly, but by using ‘funds’ they are diversified enough to help me sleep at night. I have the Kernel NZ 20 index fund, Kernel S&P Kensho Moonshots Innovation index fund and Smartshares NZ Property ETF as small investments that represent a small portion of our total investment value (about $8,000 and growing).
I am going to miss the biannual email telling me I have a dividend coming up and I’m going to miss seeing them come into our bank account. But the truth is that when they did get paid out I always just reinvested them into my ETFs/index funds anyway! Going forward, if I’m that desperate to see an investment paid into our account, I can just sell some units in a fund and get the same buzz before reinvesting them!
I’m joking! I won’t be doing this!
But the truth is also that despite this single investment actually doing really well over time, I won’t miss worrying about the fact I hold a single stock. I struck it lucky with Meridian, there was absolutely no skill involved and I think I’ve taken it as far as I’m willing to go.
From here on in I’ll probably still keep an ear open for news about Meridian Energy (FYI the price dropped in the days following my sale) knowing that I do still own the stock, but in a much more sensible and diluted way as they make up 4.74% of my Smartshares NZ Top 50 (FNZ) fund and 6.57% of my Kernel NZ 20 fund. So, I am still a shareholder of a fantastic company.
Plus of course, every time I turn the lights on at my whare that will add another cent or two to my own power bill, my supplier being, of course, Meridian Energy.
So, there you go, that’s a deep look into the inner workings of an investment decision that I’ve been meaning to make for a long time and I hope it has been useful for you to see my real numbers and get some insight into my thought processes and the processes behind the actual selling of stocks.
The only thing that now remains for me to do is update my Sharesight portfolio with this recent sell trade and then await the allocation of the new units that this money will buy in my ETFs. It really has helped to simplify my investment portfolio and that’s ultimately what I was looking to do.
Safe to say, I enjoyed this process, but it’s time to get back to the emails that have been piling up in my inbox!
