Trading PetSmart for TJX Companies

Before I write about the 'swap' I made with PetSmart (PETM) and TJX (TJX), I want to talk to you a little about "chasing performance". There is a good article on attempting to improve results by chasing after the best and latest hot stock or fund that you might want to read. In general, it is counterproductive to be switching investments or funds in pursuit of investments that have performed well in the past. Simply doesn't work.

Perhaps as an amateur investor, I am guilty of the same amateur mistakes that others make. So with that in mind, after my latest review of TJX, I have been growing impatient with my PetSmart stock which appeared to be underperforming my other holdings.

If we examine the last three months chart of the two stocks:

click to enlarge

We can see how TJX has been outperforming PETM. But that doesn't mean that the divergence in performance shall continue. But it might.

In any case, I grew impatient and pulled the plug, swapping out my shares of PETM for TJX. On July 31, 2009, I sold my 90 shares of PETM at $22.46/share, and purchased 60 shares of TJX at $36.50/share. The PetSmart shares were purchased 5/21/09 at a cost basis of $20.41/share. Thus, I had a nice gain of $2.05 or 10% since purchase. TJX closed Friday at $36.23 so I was a little 'under water' on this purchase already.

Disclosure: long TJX

Comments

[stink726:]

I don't follow TJX, but I do think you should have held on to PETM. Their last earnings report was very good and they announced a stock buyback and a large increase in the dividend. They seem to be executing well in this poor economy and I think the stock might provide good returns in the future.

Aug 04 01:55 PM