Hi PCY,
Congratulations on the starting of a new board. While a lot has been said about contrary investing in the past, it is harder for most people to attempt than most trend-following strategies. "Groupthink", "Herd Effect" and other parts of the momentum style of investing have been studied and the dangers described yet few heed the warnings.
Talk about buying when everyone's selling..........
Apparently the company's string of double digit growth years is coming to an end. This is not an end to their profits, but the slowing of the growth rate is what is so offensive to former stockholders. "Same Store Sales" and all.....
I've done okay fiddling with some of these former wunderkinds. This stock is still on Value Line's "100 Highest Growth Stocks" list, but I'd guess not for long. It is simultaneously now ranked #5 in Timeliness - lowest for the next 12 months. So, while it had 10 years of superlative growth, Value Line ranked it high in Timeliness. Now, after more than a 50% bashing of the stock's price, they now think that the "Timeliness" has faded. Give me a BREAK!!! Where was Value Line 8 months ago with their Timeliness???
So, now that most the fat's been trimmed and the earnings estimates have more substance, let's rank the stock as a stinker!!! In my opinion, there's more "value" here now than when the stock was selling near $50 and the Momentum Crowd was still playing musical chairs or russian roulette with it.
Now, here's the most telling part of the story. My wife likes the stores and spends a reasonable portion of her annual clothing budget there. She likes Christopher and Bank, too, and told me about it a few years back. She's made more on that investment than she spends at the store, so I feel good about it!!!
CBK came across my radar screen for the exact same reason back when we bought it. It was a Value Line 100 HGS stock, was also simultaneously a #5 Timeliness and had fallen about 50% from its former peak price. Here's how a $10,000 theoretical model of it has done using AIM to manage it since "after the fall from grace."
It took almost two years for the stock to muster a serious rally, but it gave us some trading profits along the way. Then in the last year it moved nicely upward. We accumulated shares as the price had weak moments and then took profits on those shares as the "popularity" of the stock improved. Total return from trading and capital appreciation is not too bad.
I have no idea if CHS will work as nicely, but since I like to play more with cyclical stocks than with next year's "biggest winner" I'm considering it as a possible addition. It's low debt structure should give it survivability over time and apparently they're still expanding, just not as rapidly.
Best regards, Tom
PS: AIM is a contrary strategy that has one buy into weakness and sell into strength. |
