Today I sold JTX. I just could not take it any more after they announced a poor quarter (Jackson Hewitt Reports Fiscal 2010 Third Quarter Results). I was really concerned about this phrase:
Based upon the information currently available, Jackson Hewitt believes that it is likely that it will breach the financial covenants in its credit facility as of April 30, 2010. Jackson Hewitt intends to initiate discussions with the lead agent under its credit facility regarding seeking relief in connection with these financial covenants.
My portfolio seems to be floundering a bit of late after a solid start to the year. I did see that KSW announced a 10 cent dividend the other day. I keep meaning to buy more, but then I forget, you know a senior moment.
Then I saw today after the bell that AGU is withdrawing their bid for CF (UPDATE - Agrium set to abandon year-long bid for CF). I am sure the crazy bid for TRA was a driver. CF is down 5% after hours.
Subscribe to:
Post Comments (Atom)
Posts
6 comments:
I thought about selling JTX today too, then I listened to the call. They are probably going to violate the covenant that limits their leverage ratio to no more than 4.2X. They are at 3.8X right now but will go over the limit after the end of Q4 because business is down. They're in negotiations with their lenders. I only bought the stock in Oct and it's down 55% for me. They said they weren't planning on missing any payments or anything on debt, just the leverage ratio thing. I'm going to hold on because I figure that the company can avoid, say, filing for bankruptcy (since they are supposed to be even to slightly + earnings in this year about to end) and by this coming October, their funding for refund anticipation loans for 2011 should be much clearer.
Now that I sold them, I expect they'll right the ship
I have drank the Kool-Aid and have followed MFI for several years.
Today I read with interest your post of selling early as all of us have owned stocks (and continue to own such stocks) that have plummeted. My stomach turns every time it happens. Which is followed by the inevitable moan of "why did I choose that stock" or "if I only had chosen another stock."
However, the temptation to sell early must be overcome.
MFI is a statistical model. The individual stocks do not matter. It is the portfolio on the whole that determines your return.
Your loss in JTX is substantially limited if you own the recommended 25 or so stocks. In other words, a total loss of a single stock should only affect 4% of your entire portfolio. Will that ever happen? Of course, it will.
While your decision to sell JTX early may be the correct one for that stock, it is not the correct decision for the portfolio. If JTX continues to drop, your correct decision to sell JTX early will only reinforce a future decision to sell another stock early. And perhaps it is that sale that will be the wrong decision.
Also, there is no guarantee that you will achieve a better rate of return from the money that you received from the sale then if the money had been left in JTX. Perhaps yesterday was JTX low point. No one knows. But by selling early, you have decided to alter the statistical model.
Once you start selling stocks early (whether down or up), MFI has become a mere screening tool as opposed to the statistical model that supposedly beats the market.
How did your entire MFI portfolio do yesterday with the JTX drop? Probably not that bad.
Relax. Have a sip of some Kool-Aid.
Shyster
Shyster, you are, of course, right. But we are emotional beings and do not always act rationally. At least I have the courage to admit when I do so...
I have just begun reading your blog -- could you please clarify your approach regarding:
1. You have only one portfolio in this blog?
2. Your purchases are random (from the MFI list) and mechanical?
3. Your sells are not mechanical? (JTX sell in this post for example)
Regards,
Jeff
P.S. Like you I have a blogger.com site, and would like to add the check-off box (for email follow-up comments) to my blog. Could you please advise me how to do that?
Jeff - I have one real life portfolio that I discuss in this blog, and that is where I sold JTX early. I also have two mechanical portfolios that I update regularly. They are both based upon selecting stocks if new to the MFI screens (either top 30 or top 50) in the past 52 weeks. These staocks are held for one year. I have been doing that since February 2008.
Finally, I create a straight tracking portfolio every month of the 50 stocks greater than 100m. I have been doing that since January 2006.
Post a Comment