I work for UHS and receive their stock at a 10% discount quarterly. I currently put 10% of my after tax dollars into the stock every check. UHS is down 20% in the last year. I am wondering what strategy I should employ with this discount. Should I continue with 10% or get aggressive? I can afford the risk as I save the majority of my check.

how much stock are you allowed to buy?

what does the rest of your savings/portfolio look like?

I wouldn't put a MAJORITY of your investments in your company stock. S

Do you have a holding period or can you sell right away?
Keep in mind taxes and holding periods when you sell (longer holding periods is less taxes in the US rather than if you sell right away).
Do they cap your purchases as a percentage of your salary? (I'm maxed out at 10% of annual salary post tax, 15% quarterly discount).
Does your company pay a dividend (if so, on what schedule??)

If you can sell right away, its a guaranteed return=free money if you don't mind locking up 10% of your annual. I sell and take the guaranteed money right now as I'm saving up for something.

I can put up to $500 a check into it every two weeks, currently putting $100. I have other stocks, mostly gold miners and an uranium miner. I have a third of my portfolio in cash and 20% in an IRA. One thing about it that I am always basically averaging down with a discount basically.

With my Meager $100 contribution a check, I don't sell too often as the $8 commission would basically eat up nearly two weeks worth of contribution. I can sell after the quarterly holding period is over. Perhaps I should max out contribution at $500 and then sell it all in one go?

I highly doubt you can sell it that fast. If you can, you should max out what you can buy and sell it as fast as you can.

You invest $500, your EV (with 8 dollar commish) is $42 dollars. You make that quarterly. Thats 8.4% return over 3 months or 33.6% annualized. All in.

Even if the stock goes down just treat that as variance. Sell it and take the loss, it will help you when you run better to offset some of your capital gains tax.

If you have enough cash, your EV is better obviously if you dont sell, but maxing out and selling is better than not maxing it out.

Jason

I think I will do the $500 every two weeks Jason. Wouldn't that be !0% gain (excluding commish) annually rather then 33.6% however? Also, I don't pay commish when buying shares thankfully.

No, it's 40%. 1st qtr, put in $1000, make $100. 2nd qtr, put in $1000, make $100. After 4 quarters you make $400 on $1000 investment. Max your contribution, forget trying to beat 40%.

The SPP I used to be in sold us the stock after the close on a Friday. I put in a sell order Sunday and it sold on the open Monday.

Def max that thing out. Only decision is whether to sell it quarterly or sell it twice a year/ yearly to keep down the commission.

Edit: Now that I think about it you probably get more benefit from selling quarterly and diversifying. Not sure though once you take into account that you have to pay on the sale and on whatever you buy next to diversify.

And yes it 40% annually before commission cause you're making 10% in 3 months. You also have to assume some sort of appreciation long term so you're looking pretty good.

Thanks guys for the help. I have spent a year thinking about this and what strategy should I employ. Maxing out and selling right away seems to be the best for me, I think.

You might want to try selling only 2x a year. There's also tax implications in selling faster too, you may want to consider that (although it might not matter for you very much). It depends what your marginal rate is.

Maxing out is definitely the right play here as long as you can afford to wait 3 months.

regarding the tax implications, a one year holding period is required to claim long term capital gains (as opposed to short term capital gains). but i don't know whether the benefit from buying at a discount is considered a capital gain or ordinary income. if the latter, then there would be no tax incentive to hold longer.

I read in the plan prospectus that the discount is taxed at ordinary income.

You may want to read the company policy. Mine explicitly states that if you sell to frequently then you will not be able to participate in the program anymore. The rule is there to keep people from buying at a discount and selling immediately.

Obviously it would be better if this weren't true. But, depending on your tax bracket, its still free money.