djshagggyd (82.38)

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Is this a foolish exit strategy? Or is it not quite stupid enough yet?

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March 19, 2010 – Comments (8) | RELATED TICKERS: CONN , TSTRQ.PK , GRH

Oh the ebb and flow of excitement and worry. It's what keeps life interesting.

I know to keep a straight face. And my finger off the trigger.

But I've gotta admit my insides are a little twisted up over my situation with CONN's. In one of my previous blogs I mentioned how I got burned pretty bad by them.

Then last week they had a pretty hefty surge. I made it all the way back up to a 5% loss. I thought for sure they were on the rebound, so I held on in hopes of getting up to a 5% profit (which would satisfy my exit strategy).

But it appears that I may have made the wrong move. I probably should have just sold when I was at a 5% loss, because over the past few days they have dropped a tremendous amount again... and now I am all the way back down to a 25% loss.

Not the end of the world. But frustrating.

And confusing... because with my limited knowledge, it's hard for me to understand what is going on with the share price. And therefore hard to make a proper plan. I probably had no business making this pick in the first place... but now that I'm here... I've gotta clean up the mess. And I'm determined to learn something in the process.

I understand the basics of why they initially crashed from their $11 share price in 2009. What I don't understand is where to go from here. I think I need some advice on an exit strategy.

I'm not asking anyone to do tell me what to do. More-so, I'm asking for advice on how to do my own research and planning. That way I can draw my own conclusions.

What is the best way for me to research the "future health" of Conn's? What would be a prudent plan of attack for an exit strategy? It seems my goal of 5% may not be realistic.

Or maybe it is.

I can't decide!

Any thoughts, advice, oppinions, etc... would be of much appreciated. Thanks and have a great weekend!

~djshagggyd

p.s.-To those who've read my previous blogs... I was able to make my goals and exit on TSTR and GRH yesterday. I was pretty happy with how it turned out. Soon it will be time to make another pick! I will post a blog soon about the companies I am deciding between.

8 Comments – Post Your Own

#1) On March 19, 2010 at 3:46 PM, facingwinter (45.41) wrote:

Right there with ya. I also lost on CONNs. Itll be interesting to follow this post. Mistakes sometimes make for the best learning experiences.

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#2) On March 19, 2010 at 4:14 PM, truthisntstupid (83.48) wrote:

If you're sick and tired of having a stock tease you, you can just about bet on it going up as soon as you sell it. I was fed up with HOG. When I bought HOG in early 2008, it had a 5-year dividend growth rate of 46%. $100 worth of HOG stock bought in 1986 was worth $22,000 20 years later.

You know what happened later in 2008. In the end HOG cut its dividend to .40/share and the securitization market went to hell. When that happened, HDFS (Harley-Davidson Financial Services) could no longer entice people to take out a subprime mortgage on their home for a $20,000 toy that it turned out that some of them shouldn't have been buying anyway. Anyway, I still believe in HOG for the strong brand and a pretty good moat - but I thought, "do I, as a dividend investor, want to be stuck with this when it may be years before it's a good dividend stock again?"

I lost $250 or so when I sold out of HOG. I added a little money to the cash I got from selling HOG, and bought MO, which roughly quintupled my quarterly dividend. Needless to say, I don't miss HOG.

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#3) On March 19, 2010 at 4:21 PM, truthisntstupid (83.48) wrote:

Uh - I have no idea as to the veracity of the claim that $100 worth of HOG stock was worth $22K 20 years later. I never checked it. I did used to have a printout claiming that, though. No doubt reinvesting dividends. It doesn't matter anyway. I've moved on.

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#4) On March 20, 2010 at 11:50 AM, Teacherman1 (47.64) wrote:

You probably should have taken the 5% loss on CONN. If I remember correctly in a reply to a previous blog, my "advice" was that since you had such a large loss, you should probably hold it if you didn't need the money because I expected them to go back up in the longer term. I also advised that if it were a smaller loss, you might be wiser to go ahead and take it, and look for another investment where you could regain it.

This was based on the concept that having "dead money" can be costly in the shorter term, even if you expect the stock to recover over the longer term.

Even long term investors need to "adjust" their portfolios from time to time.

Don't be afraid to take a loss if you don't have a good reason to hold.

JMO and worth exactly what I am charging for it.

ps Replied to your question about IRE/AIB in my CAPS. Don't know if it is of any use to you, but it is there.

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#5) On March 20, 2010 at 1:55 PM, djshagggyd (82.38) wrote:

Truth-

Yeah, I'm definitely feelin a little teased. Thanks for sharin your thoughts. One of my favorite things about this site is that it helps take away the feeling of isolation. Since I don't know any other investors in "real life", it's helpful to read about how other people have gone through the same things as me, and have made some of the same mistakes.

Btw... I think within the next few days I may have some questions for you about long-term dividend investing. Ever since I read your blog I have been cross referencing it with other articles, strategies, etc... and I've come up with some new ideas I want to ask you about.

Have a good weekend!

~djshagggyd

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#6) On March 20, 2010 at 2:56 PM, djshagggyd (82.38) wrote:

Teacherman-

Arg. You're right... I should have just taken the 5% loss. Now my "dead money" is even deader. Haha. Lesson learned!

Part of what kept me holding on and hoping for a 5% profit was this...

This is what TMFPhillyDot said on 3/3/10:

CONN has gotten slammed after a number of negative reports and missing analyst expectations. Their receivables situation is a bit complex, and if they can't find a new way to finance their debt, they could be in trouble. But they have about $8.40 in NCAV and are trading at $4.70. Very limited downside and big upside if they get their capital situation in line and can continue growing stores as they anticipate (10% per year).

On the flip-side... this is what dchabino1 said on 2/3/10:

Everyone seems to keep rating this company outperform, but I see so much trouble for them. As their growth slows (there are not a lot of plans for expansion this year), they trigger default provisions of their extremely important credit facilities, and they are no longer able to outrun credit write-offs (61% of their business is finance business, they are moving into a very difficult scenario. They depend heavily on financing people who can't normally obtain financing elsewhere, and if that slows, their business drops considerably. They are being forced to tighten up credit approvals and operate on less funding. I suspect we are going to see slower revenues for this company for quite some time, or at least until they are able to get credit facilites moving at a more favorbale pace.

Opinions of this stock seem to vary quite a bit... and even though PhillyDot got in at $4.70 (which is obviously much better than my purchases of 36 shares @ $11.31 and 68 shares at $5.62)... I still thought that I would be able to turn a profit if I held out. But I think the situation that this company is in may be too complicated for me to understand. And therefore too risky. Unless new information comes to light... I think I will make a new exit strategy for this stock, and try to get out at a 10% loss.

Btw... overall, I'm not doing as bad as I thought. I did the calculations lastnight and I am at an 18.6% profit on my portfolio so far (my first investment was 5/5/08). I'd be doing a lot better if I hadn't made bad picks like CONNS, TSTR, and GRH. But at least I'm doing better than my cousin in Cali who uses a financial advisor to invest in mutual funds. Ha!

And I look forward to learning more and doing even better in the future.

I do have another question for you if you have time...

In PhillyDot's post he mentioned CONN has $8.40 in NCAV... what does that mean? What is NCAV?

Thanks so much for your time and insight... Have a good weekend Teacherman!

~djshagggyd

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#7) On March 20, 2010 at 3:35 PM, Teacherman1 (47.64) wrote:

My wife wants me to run to the store, but I have time for a quick explanation. NCAV stands for net current asset value. It is a term used by Benjamin Graham, who was probably the most famous "Value Investor" of all time. You probably know who he is/was, but just in case you don't. If you search online you can get more details.

Have a nice day if I don't post again. Big storm heading our way.

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#8) On March 25, 2010 at 11:44 AM, djshagggyd (82.38) wrote: