A lesson I learned last year from Cato Corp, IDT, and Manning & Napier: sell out of stocks that post an operating loss and either lock in gains or cut the bleeding.
I lost 51.56% on Manning & Napier, 51.05% on Cato, and 21.44% on IDT. If I sold when their core business posted an operating loss, I could have left the positions with minimal losses. I’m fine with an EPS miss or even a loss at the bottom of the income statement that is related to a one-time expense or an accounting issue, but I think it is a clear sign that I’m in a value trap when the core business posts a loss at the top of the income statement.
I’m sold out of my 405 shares of BGFV @ $8.1293. I made money on the position, 8.27%. BGFV might continue to do well, but I’m going to stick to this sell rule. I think the rule should prevent nasty losses even if it doesn’t work 100% of the time.
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