A Lesson In Investor Patience: The Case Of The Gap

Dec.25.11 | About: The Gap, (GPS)

Barron's cover story was about the rough ride of Gap Stores (GPS} over the last decade. I was surprised to see that for ten years GPS is up 41% versus 10% for the S&P 500 and for five years, GPS is down 6% versus a 10% drop for the index. That all actually sounds pretty good for a supposedly down and out stock which on top of everything else yields 2.4% which is a little more than I would have thought.

I haven't thought about Gap as stock since I don't know when and when I saw the headline of the article, I thought I would put up a post about how any must-own or hold-forever stock can have its fortunes change for some reason - either a sensationalist reason like with Worldcom which was a wildly popular stock that obviously went bust in scandalous fashion, or in the case of Gap which seems like a well run company (casual observation only) that has simply become less relevant, which of course has happened with fashion companies many times in the past (LA Gear was an amazingly hot stock 20+ years ago).

While the above is an important lesson, it doesn't seem to actually apply to GPS. Given the five and ten year results for the name, this is probably more of a story about patience. Returning 41% over the course of ten years is still below "normal" but not a catastrophe in an up 10% world.

To be clear I have no interest in Gap Stores but the example is constructive nonetheless.