We felt as though there was a mini revolt among some of our readers when we first mentioned Jones on this site. After all, we are deep value investors by nature, and Jones may be the antithesis of deep value. Still, we thought it was important to stretch ourselves a bit, and we ultimately took a position in the $7.75 range about 6 months ago.
"Why On Earth Did You Buy Jones? Has Clyde Gone to the Dark Side"
This feels a bit like confession, well, at least the Presbyterian equivalent, but here goes. We admit, the fundamentals weren't there, there were no hidden assets, no stockpile of cash, it was the intangibles. Intangibles typically mean goodwill, patents, copyrights, etc, but that's not what we mean. What we saw and valued was an innovative company making headway into becoming a true brand, developing an audience, developing a following. We figured sales would follow, and margins would improve, but we never expected a three bagger in six months.
As value investors, we don't know how to handle quick success. We are used to slow and steady, not meteoric growth. Truth is, we were itchy and even perplexed when Jones hit $12, following a Jim Cramer induced rally. It was not supposed to happen that quickly. Valuations seemed even more out of whack. But we told ourselves, hang on. Don't make the same mistake you made with Hansen (HANS). (If you are interested, search our earlier posts for that story.) But when Jones hit $20, trading at 15 times sales, and with a triple digit P/E, we thought it was time to get the heck out of Dodge. And that's what we did.
We should be happy, having tripled our money in 6 months in a stock we never should have looked at in the first place. (By the way, Hansen was a value stock when we took a position years ago.) But Jones continues to move skyward, now trading at more than $25. We left money on the table. There is such a Jones frenzy in the market right now, that it certainly can go higher. All the chatter is related to national distribution in major retailers, and the prospect that this will drive Hansen-like growth. Will it? We don't know. We do think Jones is priced for perfection at this point, which leaves little room for error. Truth is, we were very tempted to short it the other day, but came to our senses. We just don't understand this growth thing.
Disclosure: the author does not have a position in any of the stocks mentioned in this report.
JSDA 1-yr chart: