One of our 23 stock picks, Dollar General, DG, disappointed big time yesterday when it reported both top and bottom line results that were considerably below estimates. The reasons are at least 2. First, competition from Wal*Mart having cut prices, ate some of their business, and they are now fighting back, by cutting their own prices. And, two, I understand there has been something of a Food Stamp cut-back that has also hurt.
The price opened even lower on Friday, but was bouncing back even as I write. What do we do here? Simple. One stock not being even 5% of our portfolio, we hardly ever get hurt in the very first place. Second, I always wait to see what the analysts do to their estimates. Three, I look at the dividend pay-out, and its increase. If it’s still on track, and a goodly increase, I believe management is thinking they’ll turn this around, and I’m willing to hang in there.
So, as the estimates get revised, I’ll see what the analysts are thinking. If management pays, and raises significantly, I’ll have a good idea as to what they’re thinking… and I’ll make a decision later on, as it might become necessary.
A well-rounded portfolio of no fewer than 20 stocks is one of our best protections. We never have to act impulsively, or from a place of emotional panic.
I’ll watch DG, and I will decide what to do about it later, as new intelligence concerning the company comes to me, which it will do, over the next couple or three weeks.
Here’s to your successful investing!
Harold F Crowell