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By David Sterman

It was bound to happen. When I first began looking at stocks to add to my $100,000 Real-Money Portfolio, I knew I'd eventually come to a crossroads where I might have a holding that didn't quite turn out how I'd hoped (or at least not yet), and I'd be faced with the crucial decision of whether to hold my ground or sell.

Take a look at my $100,000 Portfolio below. Based on this snapshot, everything looks pretty good -- but there's one key holding that I want to focus on today, mainly because it's taking a beating in today's trading session.

When I added Exide Technologies (XIDE) to my $100,000 Portfolio last week, I classified this pick has having ample risk along with potentially strong upside.

As I wrote back then, "for stocks like this, it's often best to wait for a tangible improvement in business conditions." But I added that "the market is not cooperating with that plan. Shares of Exide are starting to percolate, recently moving across the $3.50 mark, which is likely a sign that a combination of cost cuts and price increases will enable Exide to get back on track in coming quarters. If I wait for confirmation of such a trend, then this stock could already be above $4 by the time that happens."

Well, that bullish trading action now appears to be the result of buying in hopes that Exide would announce that business is getting better. Instead, just-released quarterly results show that business remains in a funk. Despite a sharp blow to shares in Friday trading, I am standing pat on my current 1,500 share position.

It could have been worse
Exide's fiscal third quarter results were not disastrous. Sales of $784 million were roughly $20 million below the consensus forecast. And while the company earned just $0.06 a share in the quarter -- below the $0.20 consensus -- it still marks a return to profitability after three straight money-losing quarters.

The mild winter in the United States led to a drop in the typical pattern of replacement battery purchases, and Exide likely would have exceeded sales forecasts and come much closer to consensus EPS forecasts had winter weather been more typical. Still, the December and March quarters are typically Exide's strongest -- due to cold weather -- and the company is likely to miss March quarter estimates as well for that same reason.

Equally important: The subpar quarter doesn't raise further concern about deep distress on the balance sheet. Exide still has $100 million in cash and another $150 million on its untapped credit line. Management predicts a fairly robust level of free cash flow generation in the current quarter. As long as business doesn't weaken even further from current already-weak levels, then Exide's debt-laden balance sheet shouldn't lead to financial distress.

To be sure, shares are likely to languish in the near-term, as it's hard to spot imminent catalysts. Yet for long-term investors, this remains a very inexpensive stock in relation to potential cash flow generation in coming years.

Risks to Consider: Exide's balance sheet isn't of deep concern right now, but liquidity concerns would arise within a few quarters if business materially worsened.

If you held off purchasing shares of Exide before, there's no reason to jump in right now. The prospect of a still-mild winter could cause shares to stay stuck in the $3 range in the months to come. Conversely, if you do own shares, sitting tight may be your best option, as quarterly results don't represent deepening troubles to come.

I'll take a closer look at business trends in coming weeks and months in hopes of more accurately anticipating the eventual operational upturn that I still suspect Exide is capable. But for now, I'm standing pat with my position until further notice.

Disclosure: David Sterman does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of XIDE in one or more if its “real money” portfolios.

Source: Why I'm Still Holding Exide Technologies