Selling Too Early: When Focusing Too Much On Valuation Punches Back Hard

The longer you invest in the public markets the easier it is to identify your past mistakes. While these errors have cost you some money before, hopefully you can learn enough to reduce those losses in the future. Until I reach an age where my memory starts failing me, the cases where I sold too early will be a constant (positive) reminder that getting too worked up about near-term valuations for stocks with excellent long-term outlooks can result in leaving a lot of money on the table.

Back in 2011 I lived in Pittsburgh where my now-wife was getting her PhD. A short stroll from our apartment was a fellow RIA (hat tip to Ron Heakins with OakTree Investment Advisors - hope you are doing well my friend) who organized regular meetings with local investment advisors to share ideas and stay on top of an ever-changing industry. I recently came across a brief PowerPoint slide deck I shared with the group back then over a weekend breakfast meeting at Bruegger’s Bagels. In hindsight, it exemplifies how selling too early for not the best reasons can cause heartburn down the road.

You can view the 5-slide deck on AutoZone (AZO) here and I will summarize it below.

The investment thesis was fairly simple. AutoZone held a strong position in a mature, economically insensitive industry and was using its prodigious free cash flow to conduct massive share repurchases (in lieu of taking the more tax inefficient dividend route). The ever-smaller share count helped AZO turn 7% annual sales growth into 22% annual earnings growth from fiscal 1998 through 2011, propelling the stock price to 21% annualized gains during that time (to $325 per share by late 2011).

Since I thought the trend was likely to continue, it was a worthwhile idea to share with our group. Simply put, AZO appeared to be a wonderful buy and hold stock and with the economic uncertainty still lingering in 2011 from the Great Recession, the business outlook appeared quite resilient regardless of where we were in the business cycle.

I can’t recall when I sold the stock after that, but I can tell you it has been an “on again, off again” investment during the ensuing 13 years for me and my clients, largely due to peaks and troughs in the stock’s relative valuation even as the core underlying story has remained unchanged the entire time. In hindsight, that was not the right call. The correct move was to simply buy and hold.

Despite AZO stock compounding at 21% per year from 1998 through 2011, the 2012-2024 period has seen similar performance, with the shares compounding at 20% per year to the recent price of $3,100. Trying to exit when it was overbought and add when oversold not only added more work than was needed, but also undoubtedly resulted in lower returns over the long term. Lesson learned.

Full Disclosure: No position in AZO at the time of writing, but positions may change at any time

Amazon Showing Further Signs of Expense Controls

About four months ago I wrote about how Amazon (AMZN) was doing lip service about operating more efficiently coming out of a time of rapid expansion during the pandemic. I figured that the stock, trading at $102 at the time, would need to see words translated into actual financial results in order to sustain a big move higher. Well, here we sit with the shares up 40% to $142 each, aided by a blowout second quarter earnings report. The early signs are good, but it will take a string of quarters in a row to convince skeptics.

I say that because although Amazon’s operating margins are running at about 5% right now, that remains below the levels seen during the 2018-2020 period (5.2%-5.9%). To truly be convinced that Amazon has permanently moved into a higher margin business model, I think they need to reach record-high margins and prove they can keep them there (and hopefully grow over time).

There are signs anecdotally as well that the company is serious about running leaner. About two years ago the company launched “Amazon Day” delivery - a feature that allowed Prime members to combine multiple orders into a single delivery on a day of their choice each week. For shipments that didn’t require 1-2 day delivery, it gave the company more flexibility with delivery speed and cost, and helped customers manage their deliveries more easily (and maybe even reduce porch pirate activity on their property).

As a loyal Amazon customer and shareholder, I loved this idea - until I tried to use it. I would frequently place multiple orders in a given week and specifically ask them all to be delivered together the following Monday. They never did. Orders placed on Tuesday, Wednesday, and Thursday would all arrive early and packaged in separate boxes. From a customer satisfaction perspective, at least get the single package part right. If you want to spend more for them to arrive earlier than expected, fine, at least non-shareholders would probably be impressed. I was so annoyed that they offered this service and then refused to honor it whenever I opted in.

But a strange thing happened yesterday. I received 5 Amazon orders - placed Sunday, Monday, and Wednesday of last week - in 1 box, on the day I requested. I have never been so happy to get an item 8 days after ordering it in my life. Coupled with the company’s second quarter earnings report, it sure seems like we can comfortably say something is going on here. Hopefully management keeps the focus on efficiency because for the stock to keep rising materially from here, I think we need to see even higher profit margins in the coming quarters (the holiday season will be very telling on that front since big volumes should make it easier to dramatically impact the bottom line). While I am cautiously optimistic on that front, paring back the stock’s weighting after a huge run makes sense too.

Full Disclosure: At the time of writing the author was long shares of AMZN (current price $142) both personally and on behalf of portfolio management clients, but positions may change at any time.

Will Amazon's Efficiency Push Finally Prove That E-Commerce Is A Good Business?

Last year, for the first time since I originally started to invest in Amazon (AMZN) stock back in 2014, my own sum-of-the-parts (SOTP) valuation exceeded the market price of the shares. If you are wondering why I owned it at any point when that was not the case, well, the company’s growth rate was high enough that I would not have expected it to trade below my SOTP figure - which is based solely on current financial results.

That discount got my attention, as Amazon took a drubbing in 2022 like most high-flying growth companies in the tech space coming off a wind-at-their-backs pandemic. What is most striking is just how much of Amazon’s value sits in its cloud-computing division, AWS. If one takes a moment to strip that out (everybody knows it’s insanely profitable and a complete spin-off in the future would be an enormously bullish catalyst for the stock) and focus on the e-commerce business by itself, the picture becomes a bit murky. More specifically, is that part a good business or not?

We have heard for many years - since the company’s IPO in fact - that management is focused on long-term free cash flow generation and thus does not shy away from reinvesting most/all of its profits in the near-term. But one has to wonder, at what point is “the long-term” finally upon us?

Amazon began breaking out AWS in its financial statements back in 2013, so we now have a full decade’s worth of data to judge how the e-commerce side is coming along. The verdict? Not great actually. Between 2013 and 2022, AMZN’s e-commerce operation had negative operating margins 30% of the time (2014, 2017, and 2022) and in the seven years it made money, those margins never reached 3% of sales. As you might have guessed, they peaked during 2020 at the height of the pandemic at 2.7%.

Now, do low operating margins automatically equate to a poor business? Probably not. Costco (COST), after all, has operating margins only a bit better. The difference is that Costco is a model of consistency and grows margins slowly over time, which indicates just how strong their leadership position is within retail.

For fiscal 2022, COST booked 3.4% margins, up from 2.8% in 2012. During that time they only dropped year-over year one time and even then it was only a 0.1% decline. Compare that with Amazon, which had margins of 0.1% in 2013, negative 2.4% in 2022, and year-over-year margin declines in five of the past ten years. Costco appears to be the better business.

Like many tech businesses that loaded up on employees and infrastructure during the pandemic, only to see demand wane and excess capacity sit idle, Amazon CEO Andy Jassy is focusing 2023 on operating efficiency. They are in the process of laying off extra workers and subleasing office and warehouse space they no longer need.

I think Amazon has a real opportunity to prove to investors that its e-commerce business actually is a good one that should be owned long-term in the public markets. If the company takes this efficiency push seriously, it could come out of the process with an operation that going forward is able to produce consistent profits and a growing margin profile over time with far less volatility than in the past. If that happens, I suspect the stock rallies nicely in the coming years.

If they don’t hit that level of clarity and predictability, but settle back into the old habit of ignoring near-term results and preaching the long-term narrative, I am not sure investors will have much patience. After all, Amazon has now been a public company for more than 25 years and the market wants to finally see the fruits of all that labor pay off on no uncertain terms for more than a few quarters at a time.

Full Disclosure: At the time of writing the author was long shares of AMZN (current price $102) and COST (current price $491) both personally and on behalf of portfolio management clients, but positions may change at any time.

Now Available: Bear Market Blue Chip Bargains

One of the best things about bear markets in stocks is that investors can get pretty good prices for blue chip stocks that trade at material premiums during most of the business cycle. As the market declines we can find more and more examples. Here is one I took a screenshot of a few days ago. Cut in half year-to-date, for a company of this caliber? Wow, despite it being quite overvalued near its peak. Looking back five or ten years from now, how will it look if we put some shares away for the long haul today? Feels like an interesting add to a youngster’s college fund, for instance.

Unlike with GameStop, Ryan Cohen Cashes In His Chips Just In The Nick Of Time

“Why on earth would I pay an advisor when I can trade for free with Robinhood on my phone?”

- 27 year-old meme stock trader

I am asked about meme stocks and my opinion of people like Ryan Cohen all the time. Cohen was interesting because while he has amassed a fortune over the last decade (all due credit to him), each move had also resulted in him leaving a lot on the table. He hasn’t really had a Mark Cuban moment yet (Cuban sold Broadcast.com at the top for all stock and immediately hedged the Yahoo shares he received before they crashed) so his loyal cult-like following is interesting. Consider that:

Cohen sold Chewy in 2017 for $3 billion in cash, but the buyer (PetSmart) took it public in 2019 at a value of $9 billion and today it’s worth $18 billion. About $15 billion left on the table at current prices.

Cohen bought 5.8 million shares of GameStop in August of 2020 for a mere $6 apiece (pre-split). But when they skyrocketed more than 80-fold in just five months (peaking at a stunning $483 apiece) he didn’t sell or hedge a single share. About $2 billion left on the table at current prices.

His Bed Bath and Beyond common stock investment appeared on its way to the gutter. The purchase of nearly 8 million shares at ~$15 apiece during Q1 2022 had lost 2/3 of its value as of 3 weeks ago and his proclamation that the chain’s buybuy Baby unit was worth more than $15 per share by itself was proven to be totally off the mark after buyout offers came in nowhere near that price.

Perhaps Mr. Cohen has learned a lot. When his followers bid up BBBY stock to $30 from $5 in just 12 trading days this month, Cohen unloaded quickly, selling it all in just 2 days and netting a profit of nearly $70 million or 56% while his Twitter followers were claiming he wasn’t going to sell. This trade was timed perfectly, though his business valuation skills aren’t yet in the same league as other prominent activist investors.

The move reminded me of Silver Lake Partners’ stake in the convertible debt of AMC back in 2021. Cohen’s followers hate the “smart money” hedge funds and private equity funds, but Silver Lake did what they all try to do; play the hand you are dealt the best you can. Silver Lake was sitting on losing hand of underwater AMC convertible debt in a company that nearly went bankrupt during the pandemic, but the meme stock folks bailed them out. By bidding up shares of AMC, it allowed Silver Lake to convert their debt into equity and on the very same day sell every single share at a profit.

It turns out Ryan Cohen lacks “diamond hands” when it becomes obvious that is the right move. I don’t know if people will turn on Cohen after this BBBY experiment (as with GameStop, most of them will show big losses after following him blindly), but I do know that we should not be cheering amateur investors who are gambling on these stocks without understanding valuations, balance sheets, or SEC filings. It was obvious to professionals that Cohen’s amended 13D from August 16th showed no new positions in BBBY. The filing itself even said so: “This Amendment No. 2 was triggered solely due to a change in the number of outstanding Shares of the Issuer.” But most people didn’t actually read it. Instead they just relied on posts on Twitter and Reddit to get bullish and pile in. And the ensuing rally gave Cohen his selling opportunity.

Even after Cohen filed to sell his entire stake and the filing was made public on August 17th, the believers were saying he hadn’t yet sold, even though the filing itself said he expected to sell on the 16th. And what do you know? By the close of trading on the 17th he was out completely after 2 days of selling.

These are easy things for an investment advisor to understand and offer guidance on. There were other silly rumors too, being spread by novices, like the one that said since he hadn’t held his stock for 6 months every dollar of profit Cohen made would have to be returned to BBBY, which would help them repay their debt. Sure.

Look, I am not saying that everyone needs to hire an advisor and be completely hands off with their investment portfolio. But having a pro to bounce ideas off of and direct questions to can literally pay for itself in a single trade if one is inexperienced and making speculative bets without understanding what is really going on. It can be a collaborative business relationship that adds value. And over the long term, many novices will become knowledgeable enough through experience that they can rely less and less on their advisor and eventually jettison them completely if they prefer.

The investing environment today reminds me a lot of 2000-2002 when I started in this business as an advisor. People had gotten burned by the tech stock bubble and were swearing off investing completely (not completely clear if the Robinhood crowd will get to this point yet - but their trading volumes suggest probably). They sold their Invesco tech mutual fund and put what was left in bank CDs. Those kinds of moves almost never work out well, but after you’ve been burned it’s hard to venture back into the kitchen.

I am afraid that the same thing is going to happen with the new young generation of investors. First, it was about screwing over the large hedge funds and leveling the playing field for the little guy and gal. But the field is not level when we are dealing with understanding the markets. It’s fine to hate Citadel but blindly following people on Twitter and Reddit is not going to help you build wealth. If people like Ryan Cohen start acting like the same Wall Street activist hedge funds that they love to hate, it will likely turn off this new generation from the markets.

For Real: Labor Hours Likely Stunting The Business Model at The RealReal

As an only child, much of my 2021 was spent handling the estate of a loved one who passed away unexpectedly last spring. As I went through my childhood home and organized possessions that had been accumulated by my family over 50+ years it became obvious that the best way to get the job done eventually and minimize wastefulness (by finding good new homes for most items) was to go the consignment route. With a category such as apparel and accessories, the natural fit was The RealReal (REAL), a publicly-traded full service online consignment web site.

Unlike some of their competitors, REAL does the hard work for you and takes a higher cut for their efforts. While I was not considering the shares as an investment, the experience of using the service as a consignor, which I am a few months into, was nonetheless interesting from a business analysis perspective, especially with the stock having lost about two-thirds of its value from the all-time high.

My takeaway is that the main reason why a client would hire REAL (minimize the work required to sell items) is exactly what will make this a very hard business to run efficiently and profitably. With labor costs rising and worker shortages front and center due to the pandemic, the barriers to scale are likely even more pronounced now than a couple of years ago.

Consider how many labor hours REAL employees put in to make this model work. First, a local consignment representative will come to my house, go through my items, bag them up, and take them home with them. They do this for free. I also have the option to box them up myself and ship them to a REAL distribution center via UPS, also on REAL’s dime. Given the volume I have, I opted for local pickup.

Once the employee has the items they manually photograph and inventory them before packing them up and sending them in via UPS. Upon reaching their destination, another set of employees unpacks them and sorts them to be routed to the appropriate product specialist. The experts will then inspect every item for condition and use their knowledge of the current market to price and list each item on the site. And obviously once an item sells, more labor is required to pack and ship it to the retail customer.

Oh, and don’t forget returns. While REAL requires buyers who want to return something pay the return shipping costs themselves, more labor is needed to receive the items, inspect them for damage, and restock them in the warehouse and on the site. Return rates in the apparel sector are sky high, often in the 30-50% range.

Even without rising minimum wage rates across the country and a renewed enthusiasm for remote-only work, you can see how labor intensive this business model is. And it doesn’t exactly scale well with higher volumes of items. Yikes.

Okay, but don’t they make good money off of sold goods? Sure, with gross profit running at about 60% even accounting for lower margin physical stores, of which they have some. But the expense lines are nuts. For the first nine months of 2021, SG&A, operations, and technology costs totaled 95% of revenue. Add in a another 14% of sales for marketing and the operating loss was negative 49%. Pandemic related expenses are hurting lately, but even in 2019 operating margins were still negative 32%.

It’s going to be a tall order to get this business, in its present form, to profitability. Gross profits are falling despite rising revenue and they have seen no expense leverage except on the marketing line (undoubtedly due to huge labor needs).

Before this experience, I wasn’t really paying much attention to REAL stock. Afterwards, with shares trading at about 2x 2021 revenue, I don’t see any reason to start. Maybe somebody bigger buys them at some point, but other than that, I recommend merely consigning through them if you don’t want the hassle of photographing, listing, pricing, and shipping stuff yourself.

Full Disclosure: No position in REAL at the time of writing, although positions may change at any time

Is Casper Worth A Look After A Sleepy Public Market Debut?

While I am not an active investor in the IPO market (if the smart money is selling, why would I want to pay a premium to take stock off their hands?), I do sometimes get enticed by busted IPOs; those that were thought to be up and comers but quickly faded into the background. Casper Sleep (CSPR) seems to fit this bill and I find it to be an interesting small cap to dig deeper into.

Casper took the sleep sector by storm when it started selling mattresses through the mail in 2014. Don’t like it? Just send it back, no worries! Consumers rejoiced and sales went from zero to $100 million by year two and to $250 million by year four. As competitors emerged shortly thereafter, the company lost some of its first mover luster and by the time executives took the firm public in early 2020, investors were past the point of caring (the pandemic probably didn’t help either). After initially trying to offer shares between $17 and $19 each, Casper’s IPO priced at $12 and the stock immediately sank even further. Today you can get your hands on them for $7.50 apiece.

Okay, so why on earth would I want to spend time looking at a money-losing mattress company that has a bunch of competition and no investor interest? Well, as with most value investors, the answer probably has something to do with the price.

At $7.50 per share, the equity value is about $300 million. Despite never having been profitable, Casper is paring losses every year, with EBITDA margins of (28%) in 2017, (25%) in 2018, (18%) in 2019, and (12%) in 2020. Gross margins are around 50%, so there is no reason the company cannot reach profitability, and probably could right away if they wanted or needed to. The balance sheet is in decent shape (net cash of $23 million as of December 31st), so management’s current plan to continue shrinking losses while growing the business does not seem overly worrisome.

Meanwhile, despite their competitors Casper continues to grow revenue and expand its product lineup. Sales doubled from 2017 to 2020, to $500 million, and are expected to continue to grow in the mid teens this year. Based on current consensus forecasts, the stock fetches a forward price-to-sales ratio of less than 0.50. By my math, the bar has been set very low for this company.

Let’s assume Casper can turn profitable over the coming few years and that investors would be willing to pay 15 times earnings for the business, neither of which I think are aggressive inputs. At one-half of annual sales, the stock is pricing in a roughly 3% net profit margin at maturity, and you get any future sales growth for free. It’s hard to argue the stock is overvalued here, unless you think the business model is unsustainable or that there is no room for Casper to take share in the sleep-related markets they enter in the future.

While admittedly not the most exciting business in the world, I think their brand might be strong enough to meet or exceed Wall Street’s currently low expectations, as well as some fairly conservative assumptions I settled on. So what could the future path for the stock be?

Well, let’s say Casper meets their 2021 sales forecasts, grows those sales by 10% annually from 2022 through 2024, and reaches a 5% net profit margin in 2024. That would bring 2024 earnings to $39 million. At 15 times, the stock would essentially double from here.

And there is potentially more upside than that. What if sales exceed those levels (as millennials continue to get married and buy homes), the P/E multiple does not fetch a discount to the overall market, or a bigger player comes along and decides to buy the company outright for a nice premium?

Don’t get me wrong, this is far from a sure thing. Small caps that are losing money come with plenty of risk. But given how low expectations are and based on the current market value of the business, I think Casper might be unloved, unnoticed, and undervalued as a result, which means it’s worth watching.

Is Another Mania In Overstock Stock A Chance To Short?

Overstock.com (OSTK) has long been a volatile and controversial stock, at least in part due to its founder and former CEO, Patrick Byrne. Although I don‘t short stocks very often and do so even less in client accounts (most of the assets I oversee are in retirement accounts, where shorting is not allowed), Overstock is one of those businesses that makes for an attractive short at times; a much-hyped business with relatively poor economics that loses money. Every so often it sees a huge spike in stock price, only to fall back to earth. And then the process repeats itself at some point. Here is a chart of OSTK shares from 2003 through 2019:

During the pandemic, e-commerce businesses have seen an acceleration in sales growth and stock prices have responded, with the likes of Amazon (AMZN), Etsy (ETSY), and Wayfair (W) surging. Overstock, despite being a secondary player, has once again seen its stock soar:

As I often do in situations like this, I checked to see what the borrow charge was to short OSTK (stocks with smaller floats often cannot be shorted due to a lack of available shares - or in other cases investors need to pay a fee to borrow the stock which is often high enough to negate any material gains you could earn). Interestingly, the borrow charge on OSTK right now is immaterial, so I am now short the stock. While this mania in tech-related stocks may not end anytime soon, which could spoil this particular trade (insert “the market can remain irrational longer than you can remain solvent” disclaimer here), I have little doubt that the intrinsic value of OSTK and the stock price have not moved in tandem during the last couple of months.

So how bad is the business? Well, free cash flow has been negative every year since 2015 (EBITDA negative since 2017). Revenue in 2019 was below 2015 levels. For Q1 2020, EBITDA and operating cash flow were both negative. As folks were working from home and needed to bulk up on home furnishings, OSTK saw Q2 revenue jump 109% year over year. EBITDA went from negative $20M in Q1 2020 to positive $39M in Q2 2020, as sales surged 122% quarter over quarter. This strength is likely temporary, as hard goods are typically not high frequency repeat purchases.

Overstock shares were trading for about $9 before the pandemic at the February market peak, bringing the market value gain over the last 5 months to roughly $2.5 billion. Even if Q2 2020 EBITDA was maintained in perpetuity, OSTK currently fetches a multiple of 17x EBITDA. That valuation might not seem crazy, until you consider that the brand is a second tier player, at best, and more importantly, maintaining sales at these rates over the long term is simply not reasonable. Further supporting a negative view on OSTK is the fact that the company has actively shopped the retail business to potential buyers recently and found no takers willing to offer a fair price.

Full Disclosure: Short shares of OSTK at the time of writing, but positions may change at any time

Loose Merger Agreements Are Causing Corporate Clashes Among Partners

It is being reported that Sycamore Partners is trying to get out of their $525 million deal to acquire a controlling stake in Victoria’s Secret, claiming that the chain violated the agreement when they closed their stores due to the pandemic. I have not read that particular agreement, but I was curious whether there was a MAC (material adverse change) clause in Simon Property Group’s deal to buy Taubman Properties and extend their lead as the dominant shopping center REIT in the country.

The language in their merger agreement is likely similar to most that were drafted during a bull market (light on conditions that would allow the buyer to walk away). In fact, I was pretty surprised to see what events were listed specifically that would under no circumstance warrant exiting the deal. Form page 82 of the agreement:

That’s right. Why should a pandemic impact the closing of a merger between shopping mall giants? :)

I wonder if lawyers will leave pandemics on that list in future merger agreements or if Covid-19 really will come and go without leaving a trace longer term in the corporate world. Hopefully buyers will get smarter and protect themselves against long tail events.

Interestingly, TCO stock is currently trading around $41 per share (22% below the deal price of $52.50 in cash). As a Simon shareholder, I hope they are able to negotiate the price down but still use their vast liquidity to scoop up Taubman’s trophy assets. With the deal supposed to close around mid-year, we should find out soon enough.

As Markets Stabilize While Peak Infection Rates Loom, Where Should Fresh Capital Go?

My last post highlighted the fact that the U.S. stock market in recent times has tended to find a lot of support around 15x trailing earnings. It appears that equities have calmed down a little in recent days, with a bottom having been made (perhaps temporarily) on March 23rd. On an intra-day basis (2,192) the valuation at the bottom was 14.0x 2019 S&P 500 profits. On a daily closing basis (2,237) it comes to 14.2x and on a weekly closing basis (2,305) the figure is 14.7x.

I am not going to predict that we have seen the lows. Even the experts in the field are merely guessing as to Covid-19’s ultimate infection path and even scarier to me is that I doubt health and government officials even have a plan for a slow loosening of social distancing guidelines, so we really don’t know what to expect from a economic rebound perspective. On one hand, I am comforted that the market did find a bottom around similar levels to recent years’ corrections, but on the other hand this situation is so much different than prior instances that I am not sure it is a very strong comparable event.

So rather than try and guess these things, like so many pundits in the media insist on, I think it is more helpful to think about where fresh capital could be deployed on a long-term basis as we wait this whole thing out. I am finding it too early to average down on more controversial existing holdings (travel-related, for example) because companies have not given us much data yet. Most have disclosed cash balance and credit line availability, but without knowing cash burns rates that only tells us so much.

So then the attention turns to businesses that are publicly traded, beaten down, and are less reliant on credit availability even if they are shut down. Essentially, high quality businesses that are on sale now but typically are not. Sure, there are examples in sectors where headwinds abound (Starbucks down 35%, for example), but there are more obscure ideas too. How about the few publicly traded professional sports teams? How confident are we that sports franchise values will continue to rise over the next 5 years? Even if seasons are cancelled, will the franchises lose 25-35% of their value for a significant amount of time? How often can small investors buy into sports teams at a big discount? Not often.

I know rental income in the near-term is problematic, but seeing owners of hard assets like real estate down 50-70% in a month is startling (and likely an opportunity). And you don’t need to go out and buy mall owners if you don’t feel inclined. How about Ventas, one of the leading owners of medical facilities? The stock is down 65% since February.

How about the big banks that were forced to be well capitalized so they could weather something like this? Jamie Dimon just went back to work after emergency heart surgery and JP Morgan Chase is widely considered the best-run bank in the world. It’s stock is down 40% from its 52-week high.

There are many companies I feel like I need for information from before I can decide whether to cut them loose or buy more shares. There are others where I feel like I can get comfortable given the low price, no matter how the next few months shake out. If you find unique situations where the franchise value is likely very secure and yet the stock is still down far more than the market itself, take notice. You might be surprised what you find. I mean, honestly, should Target stock be down 30% in this environment?

Happy hunting!

Full Disclosure: Long shares of Starbucks at the time of writing, but positions may change at any time