If you find yourself working for a publicly traded company, you might end up receiving restricted stock units (RSUs) as part of your compensation. One big downside to RSUs and owning stock in the company you work for is there are often blackout periods in place that prevent you from selling the stock during parts of the year. This can be especially problematic if you think the market is in a downturn, since it can force you to hold onto the stock even if you would prefer to sell it and buy more later at a better entry point.
The obvious way to avoid this problem is to simply wait and sell it, but there are times when you might not want to wait for whatever reason. For example, let’s say you work for BP and you have 100 units of (BP) stock that vested on January 20th. Let’s also say that based on their earnings schedule you were only allowed to trade their stock between January 4th and January 29th before the next blackout period, which lasts 2 months. In this case you only had a narrow window (January 20th – January 29th) to trade the stock, and it was going down at the time. Now let’s say you had a feeling that the stock was eventually going to go up again in February, but you didn’t necessarily think it would stay that high until April, which is when you would be able to trade it again if you held it. Is there anything that you could do to be able to sell the stock in February?
The short answer to this question is no, since that would be insider trading. However one thing you could do is find your company’s doppelganger. For those that aren’t familiar with the term, a doppelganger is a remarkably similar double, and in this case I’m referring to a stock that exhibits very similar price movement to your stock for a period time. Finding your company’s doppelganger can take a little time, and typically involves a two step process:
- locate potential stocks
- compare their price to the price of your company’s stock over time
There are a couple of options you can use to locate potential stocks. One option is to simply go to yahoo finance, lookup your company’s ticker, and then take a look at the ‘People Also Watch’ section on the right:
In this case we can see one of the companies listed here is Shell (RDS-A). Another way you can find potential stock is by using a stock screener, such as finviz, and then look for companies with a similar market cap in the same industry. You can also look for similar companies in a similar sector if you are worried about buying stock in one of your company’s competitors.
Once you have some potential stocks picked out the next step is to compare how the stock price has performed over time to your company’s stock. Bringing up the full chart for the company on morningstar is one way to do this, and in this case we can see the prices for BP and RDS-A look very similar over the past few months:
So in this case, if you wanted to you could sell your BP shares during your trading window, buy a similar amount of stock in RDS-A, and then sell those later without having to worry about your company’s blackout period.
If you are receiving RSUs from your employer, hopefully you are long on the company and believe that the stock will go up in value over time. While this strategy definitely isn’t perfect, generally speaking there are times when it can be useful. For example, if you are coming up on a blackout period and the market is in the middle of a correction, but you want to take some money out of stocks and use it to buy a house, this strategy could be useful. Please keep in mind I don’t work for either of these companies (or in the oil industry at all) and these stocks were simply used as an example. As a side note I probably also wouldn’t use stocks that aren’t direct competitors if I decided to do this. I don’t personally own enough shares that selling them would have any meaningful impact anyway, it’s just a matter of personal preference.