I don’t think this is a market with any patience for patience. And anyone who is waiting for fundamentals to prove pessimistic sentiment wrong on a specific stock is likely to have a long wait.
If you’re looking to sell something to raise cash in case we get a buying opportunity on a fiscal cliff disappointment, selling a stock that has turned into a short-term disappointment is a reasonable move. If this market does bounce, stocks like these won’t lead the way upwards and in an unsettled market like this working through a short-term disappointment can turn into a six-month project.
Which is why I’m selling Dollar General (DG) out of Jubak’s Picks http://jubakpicks.com/the-jubak-picks/ today. On December 10 Dollar General (DG) reported earnings of 63 cents a share, 3 cents a share above the Wall Street consensus, but the stock get killed the next day on reduced guidance for the fourth quarter and worries about tighter margins. In the current market I can talk as long as I want about the 7.8% drop on the news being excessive or how tough comparisons with the very strong quarter in 2011 distort short-term results or the likelihood that tighter margins are temporary and cite the company’s plans for cutting costs and I think I’d be wasting my breath. The fiscal cliff talk has taken a bite out of consumer confidence as Wall Street has expected and with the early holiday shopping numbers looking disappointing, suddenly everybody is worried about retail. I think this might be a great sector to own half way through 2013 and in that time frame I like this stock with its appeal to consumers trying to save a buck in a stumbling economy. But right now? I think this is a good source of cash.
I’m selling the stock with a 10.1% loss since I added it to the portfolio on November 26.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Dollar General as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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