BGFV

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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3 thoughts on “BGFV”

  1. Sounds like a good rule ValueStockGeek – nothing worse than waiting and waiting for a business to turn around while the stock price slowly deteriorates. I’m always attracted to underperforming businesses but the hard part is trying to understand if and when things will turn around!

    Cheers, Frankie

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  2. I nearly fell into the trap of investing in Manning & Napier as a purely statistical investment. Luckily I examined their complicated Up-C structure and realised that it wasn’t actually so cheap.

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