Why I might be selling my NAB stock in March

Here's why I'm thinking about breaking my 'never sell' rule for NAB.

| More on:
A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I've owned National Australia Bank Ltd (ASX: NAB) shares for many years now. In fact, NAB was one of the first ASX 200 shares I ever bought. But this March, I'm seriously considering selling my NAB stock. 

Normally, I'm an investor who hates selling my shares. For me, selling doubles the mental efforts of stock market investing. It's hard enough to find a company that you'd like to buy as well as the right share price to buy it at. And adding the worry over what price you'd sell at is an unnecessary increase in mental stress in my view.

Instead, I try to emulate the Warren Buffett maxim that "our favourite holding period is forever".

However, this doesn't always go to plan. I've had to sell many of my past investments before, usually due to miscalculations of a company's intrinsic quality on my behalf.

I don't believe I've made a mistake in buying and owning NAB shares for the many years that I have. I've enjoyed some decent capital appreciation on my NAB stock since my first purchase. As well as the generous, fully franked dividend income one expects from an ASX 200 bank share, of course.

Why am I considering selling my NAB stock then?

So my increasing discomfort with owning NAB stock right now stems from valuation concerns. The NAB share price has had a stellar few months. As recently as June last year, this ASX 200 bank was going for around $25 a share.

In the past few weeks though, those same shares have crashed through a series of new 52-week highs, most recently last Friday's $35.12. That means that from June 2023 to March 2024, I've enjoyed a gain of almost 40%. Plus dividends.

That is a highly unusual return for an ASX bank stock. It's quite common for most ASX banks to spend years sitting at the same share price. Check that out for yourself below:

NAB stock price – 10 years

Every time NAB stock has hit new 52-week highs in the past, it has, more often than not, come down to earth. Sometimes dramatically so. Could this time be different? Possibly. But I doubt it.

NAB, like all ASX banks, is a cyclical share. Investors have enjoyed far more meaningful returns in the past from dividends than capital growth.

So if I sell NAB shares this March, and then buy them back at a future point for a lower share price (and higher starting dividend yield), I'm guessing I'd probably be better off than just holding them.

As I began by stating, I don't like selling my ASX shares. But NAB's new highs have certainly got me questioning that wisdom.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A woman in hammock with headphones on enjoying life which symbolises passive income.
Dividend Investing

Invest $20,000 in ANZ shares and get $1,200 in passive income

Can investors rely on ANZ for a 6% yield in their cash?

Read more »

Bank building with the word bank in gold.
Bank Shares

What happened with the big 4 ASX 200 bank shares this week?

Here’s why the ASX 200 bank shares caught my attention this week.

Read more »

Male hands holding Australian dollar banknotes, symbolising dividends.
Bank Shares

Do the dividends from ANZ shares still come fully franked?

Is ANZ becoming a big four bank that doesn't frank its dividends?

Read more »

A man looking at his laptop and thinking.
Bank Shares

Are Westpac shares undervalued by the market?

This leading broker has given its verdict on the banking giant.

Read more »

Business women working from home with stock market chart showing per cent change on her laptop screen.
Bank Shares

NAB shares push higher on leadership changes

This banking giant just announced a number of executive changes.

Read more »

Young woman using computer laptop with hand on chin thinking about question, pensive expression.
Bank Shares

Do CBA shares even pay a good dividend anymore?

CBA's share price success has come at the expense of its dividend yield.

Read more »

A businesswoman holding a briefcase rests her head against the glass wall of a city building, she's not having a good day.
Bank Shares

This ASX 200 bank share could drop 20%!

Goldman Sachs is feeling bearish about this bank stock.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Bank Shares

Do Westpac dividends still beat money in a term deposit?

Term deposits are a lot closer to dividend returns than they used to be...

Read more »