Sold 200 shares in my IBM ESPP

I have received many comments over the past year about the large amount of company stock I am holding in my ESPP (employee stock purchase plan). Commentors espoused the virtues of diversification and mentioned the risk of double damage between losing my job and losing my savings should something unexpected happen with the company.

While I agree with just about all the reasons to diversify and in general not hold large quantities of company stock I held tight and continued participating in the ESPP. I couldn't bring myself to sell the stock as I just thought it was too undervalued.

While there was some uncertainty about the business I had confidence that the company's management team was doing the right things to sustain the business. The P/E on the stock was recently as low as 11.2 on the estimated earnings for 2007. That means for every dollar invested in the company was earning a ROI of nearly 9% the 1st year and more the next. For a company in solid shape and in confidence of the changes that were happening that would improve the business I felt it was a no-brainer to hold onto my stock while it was so undervalued.

Well in the last couple weeks the stock price has been on a roll. Last week 3Q earning were announced above expectations and the stock jumped up even more. The stock went from $73 in July to $89-91 last week. After earnings I felt the stock was now more fairly valued. Things are now looking a little brighter at IBM and I hope the momentum continues.

I decided to sell 200 shares of IBM stock in my ESPP. I don't think the stock is overvalued, but I think it is now more fairly valued than it has been in a long time. I don't know if the stock is going to go up or down from here. I fully hope the stock will continue to go up, but in the mean time I felt it was now time to increase my diversification.

I sold 200 shares in my IBM ESPP for $90.97/share - $29.95 sale fee. Now I need to start thinking about what to do with my new found cash. I have suddenly gone from cash poor to cash flush.

Tags: ESPP, IBM, stocks,

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Comments (6)

That's awesome.

I am now eligible to start contributing to my ESPP and I can't wait to start seeing the matching funds roll-in :)

Congrats.

Posted by NLG | October 23, 2006 12:46 PM

I sold 20 share of mine too. Obviously I haven't been working there as long as you. :) I made 15% on the sale, though, and I'm happy with that return.

Posted by Nels | October 23, 2006 3:17 PM

What a ripoff paying ~$30 to sell 200 shares. Use a DTC transfer to transfer the shares from your IBM-preferred broker to your cheap discount broker. They may discourage you, but they will not try to stop you. Then sell the shares for little to no brokerage fee. I've done this while working for two major tech companies without any problem. I was blown away that it only took one or two days and no cost to transfer shares after FAXing instructions to the company-preferred broker.

Posted by twm | October 23, 2006 7:42 PM

Interesting - I didn't think of that ahead of time. Thanks for the tip.

Posted by 2 million | October 23, 2006 8:11 PM

I'm in the same boat. I purchase and hold onto my ESPP shares. It has also worked out very well for me. I recently started to sell some shares to diversify my portfolio.

Posted by Money Turtle | October 24, 2006 8:32 PM

I don't recommend transferring your shares out of your ESPP account before selling. Taxes for ESPP shares can be complicated, and one of the nice features of most ESPP plans is tax records from the brokerage defining what is income, lt gains, etc.

It's a service that can easily be worth $20 come tax time.

Posted by Adam Nash | October 25, 2006 12:11 AM