Wednesday, September 28, 2005

Sell Now, Buy Later

I never thought I'd turn into a trader... but I feel like I have to do something like this with Finlay. Press releases keep coming out that negatively affects the company--even though many of the things mentioned are already exhibited in their recent financial statements. 184 store closings as a result of the Federated and May mergers... Not until Mother's Day, and when they start they will go on until October 6th 2006.

The markets punished the stock pretty hardcore today, giving it a downside of 15%... putting our total losses in the initiative for this stock to about 30%ish--about a 3 and a half % downside for the portfolio as a whole can be attributable to FNLY.

I won't lie, this sucks. The most important lesson I've learned with this stock is that I really shouldn't think I'm smarter than the market. Yeah, sure, it makes no sense for a jewlery company with most of its tangible value in jewlery to be trading at below book value, but the market is also half hype and half numbers. It knows when it doesn't like something, and 184 store closings--although it doesn't affect the balance sheet at all (for all costs related to closing would be on the 'host' stores)--is still horrible news.

With the negative catalyst in the Sept. quarter--the losses of approximately 3m, I don't expect the market to take things more lightly, and the stock will probably get punished even more.

I will definitely look at the stock again Nov ~ Dec, when the price is at rock bottom. With Christmas earnings in sight, I will make a decision to buy or sell around that time instead. The downside risk is simply too much for me to take as of now.

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