I’m speaking about my decision to sell shares of Coach prior to earnings. Shortly after I purchased Coach, I wrote this article on Seeking Alpha. Shortly after writing that article, I began to seriously question the decision to invest in shares of Coach. I believe it started when I saw slides from Stuart Vevers’ 2015 Spring ready to wear line. The reason was, as I noted in my last post, that this appeared to me to be a sharp divergence in fashion identity and branding for Coach. It negated a lot of my original thesis. I began to get very concerned about the possibility that Coach would alienate its core customer, resulting in a huge disaster for investors.
If recent events have proven anything to my readers, it’s that I cannot see the future. However, I can think in terms of probabilities. In so doing, I ask myself what is the potential upside from tomorrow’s earnings release? I can’t come up with a realistic scenario in which Coach posts any kind of highly positive earnings surprise. But I can envision another negative earnings release. My reasoning is largely qualitative and anecdotal, which is all any of us have to go on until actual numbers are made available.
LeapFrog was and is still my largest investment on a cost basis. I was probably more bullish on that stock than any other, and even stated as much in my writing. In addition, I wrote two articles on Seeking Alpha that were incredibly bullish on LeapFrog. They were based on my honest assessment of the situation at that time. As it turns out, I could not have been more wrong. My initial reaction was one of extreme humiliation.
For the last few years, Best Buy has been fighting a war that they are now winning. Weaker competitors such as RadioShack have become terminally ill. However, the result for Best Buy is that they’re emerging stronger than they were before.
In this post, I review the performance of the newsletter stock picks, the actual portfolio I manage, and discuss how the two came to be one and the same.
Further, when you hear baby boomers and other generations decry millenials as lazy, good-for-nothing basement dwellers, you have to be aware that this kind of talk is reminiscent of every generational divide that ever existed. I’m sure that in the late 60s and early 70s, the parents and grandparents of baby boomers routinely characterized them as lazy, immoral, pot-smoking hippies. But baby boomers grew up. Just like they moved out of their Volkswagen vans, millenials will move out of the basement, probably pretty soon.
The shale E&P bubble is about to burst. Many shale E&P companies weren’t turning profits even with higher oil prices. Many of them are highly leveraged, which is a fancy way of saying they are in debt up to their eyeballs. We have history to guide us through times like this. The strong players will survive and thrive once again at some future point. The weakest players will not. In the meantime, market participants, as they always do, will drive the price of even the strong companies way lower than they should be. This will create wonderful opportunities for value investors.
But, while my definition of risk has changed significantly since I began the site, I can say that I certainly didn’t have any idea how much “risk” God would lead me to take. When I began this site, I only wanted to invest, and write about, taking relatively small positions in rock solid dividend paying stocks. I had no idea that I’d end up taking concentrated positions in more “risky” stocks.
This is a company that holds $4.21 in net cash per share on its balance sheet (net cash refers to total cash minus any outstanding debt, capital leases, etc.). At a roughly $9.00 per share price, the business itself is being valued at roughly $4.80 per share. This is in spite of the fact that the company produced $1.07 in free cash flow per share over the last 12 months. In short, the pristine balance sheet and attractive valuation, combined, make for an incredibly compelling reason to take a position in the stock.
After everything was said and done, I booked a $77.91 profit from my latest trading in KMR. But, the purchase of KMR turned out to be a huge mistake. Why? Well, for starters, I said on August 14th that I would not buy KMR shares again unless they dropped below $87. Then, I turned around less than a month later and violated my own rule. How is that for discipline? It’s not very good. It just goes to show you how easy it is as investors to talk ourselves into things, even when we know better.