Seeking Alpha

DAG1996's  Instablog

DAG1996
Send Message
I’m a private investor who manages my own four portfolios, and a half dozen more for family members. My focus is long term, but I also trade some short-term opportunities. I'm fortunate to have worked for a NYSE-traded financial firm for the decade up to 2010, but I'm not an adviser and my... More
  • Kroger: Granted, That's A Poor Article Title 10 comments
    Jan 29, 2014 10:11 PM | about stocks: KR

    Regarding my "Kroger: The Earnings Dip Is A Buy Opportunity" article from December 8, I've gotten a few messages from readers, each with slightly different wording of the same things. There aren't enough hours in the days for me to offer individualized advice to every reader so I've written out some thoughts to address each of the recurring issues.

    The first thing I must say is that I should have put more thought into the title of that article since "Dip" and "Buy Opportunity" don't mean exactly the same things to everyone. My intent was to draw attention to a dip that I think represents an opportunity to make one of a number of buys into a (NYSE:KR) position, whether an existing or new position. With that said, I also freely admit that my calls will not be 100% accurate every time and that applies to downside risk, just as it applies to upside potential. I've never gotten messages or comments the many times I've called for a stock to go from $35 to $45 and it went to $50 instead.

    So, when I say things like "I consider the downside risk to be ~5-7% below the 50-day exponential moving average," I am not saying that I think it's impossible for the stock to go 8% below its 50-day, nor am I suggesting setting a stop loss order at 8%. I am offering an opinion of a ballpark guide for what to expect in normal market conditions. I am not predicting what will happen during all future market corrections under any circumstances. In other words, when I say I think a stock is unlikely to go much lower than "about" ~5-7% below its 50-day EMA, I'm trying to give readers a sense that it's reasonable to believe that the stock won't go 15% or 20% below its 50-day EMA each time the market dips.

    Related to that, I've written extensively about the reasons I don't use and don't recommend automatic stop-loss orders (section 3), as well as the reasons that I recommend always scaling into every stock position. So, without repeating all of that, I'll just say that both of those opinions result directly from the fact that I'm an investor, not a trader. So, my strategy is to buy into weakness, not sell into weakness. I think this goes without saying, but I'll say it anyway: every single stock in the market experiences temporary periods of weakness, and that includes KR.

    I also want it to be clear that, every time I say I "recommend" a stock, what I'm saying is "I recommend considering this stock if, and only if, you conclude for yourself that this stock is right for both you as an investor and for your portfolio, based on the totality of information I've offered to supplement your due diligence, not based only on the potential that the stock may go up." Perhaps it's obvious why I don't repeat that full statement every time. Please note that the timeline for my KR call is 9-12 months and only one month has passed. If a person is a short-term trader expecting big returns in a short time or the type of investor who watches each stock every day and wants to react each time they tick up or down, KR may not be the right stock to own. Similarly, even if one is a long-term investor with a true long-term perspective, but has a small portfolio of only five positions, KR may not be the right stock. KR is not a stock that is likely to double every year into perpetuity, but it is a strong defensive holding to help diversify a large portfolio. In other words, KR is a stock to help manage portfolio-level risk because it is very unlikely go from $40 to $4 in a week when there are extreme market events, as there will be again in the future. Perhaps look at a chart that shows how KR fared in 2008/2009 compared to very many "blue-chip" stocks.

    Only one metric used for my KR valuation calculations has changed and it's an insignificant change. The full-year EPS consensus estimate has gone from $2.80 to $2.79, which shaves 30 cents from the valuation, and only ignoring the fact that the "guidance" and "projections" that all valuations are based on are only estimates, not exact science.

    Therefore, my opinions on KR are the same as expressed in the article, though I do think it has traded too low and represents an even better buying opportunity than expected. However, that's only true for the right kind of investor and if they have a portfolio that this stock suits. Not every stock I own and/or write about is right for every investor. If you ever have questions about whether a stock I recommend suits you, feel free to ask questions in the comments section and I'll do my best to help you decide. At the same time, I can't decide for you since it's simply impossible for me to know everything that needs to go into the decision (age, investable assets, other investments, risk tolerance, etc., etc.).

    If you disagree with anything I've said, or would like further clarification of what I mean by anything I've said, please speak up in the comments section. I need to know how others interpret the things I say in order to figure out whether/when I need to adjust the ways that I word things in order to be more clear to all readers. At the same time, please keep in mind that SA has readers at all levels -- from professional investors who get frustrated by excessive explanation, to amateurs who do not know what many standard investing terms mean -- so writing articles that don't alienate one group or the other is borderline impossible.

    Disclosure: I am long KR.

    Stocks: KR
Back To DAG1996's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (10)
Track new comments
  • joe kelly
    , contributor
    Comments (1733) | Send Message
     
    I don't know what kind of messages you get other than the 3 or 4 we've exchanged but everyone needs to know buy and sell decisions are our own and the consequences are our fault.

     

    If we were correct every time we'd all be billionaires.
    29 Jan, 10:52 PM Reply Like
  • DAG1996
    , contributor
    Comments (3082) | Send Message
     
    Author’s reply » Thanks, Joe. You're right that the decision always rests with the individual investor, but I don't think that's really the biggest issue since only a tiny percentage of people want to directly blame others for their decisions. I think the main issue is that there are so many different levels of experience and knowledge that there are tons of different interpretations of everything. So no matter what I say, I'm overstating or understating to somebody. I just want to better understand how people are interpreting things so I can adjust, but I don't get enough feedback. All I know is what I say ... I don't know what people hear.
    29 Jan, 11:16 PM Reply Like
  • joe kelly
    , contributor
    Comments (1733) | Send Message
     
    For the most part we hear what we want to hear. I spent last year looking for the big score through day and swing trading. I found out for myself if you do hit a big one it's more luck than anything. But I subconsciously or whatever sought out those that agreed with me on whatever I was looking at. It takes self discipline to invest the way you do. I admit I still don't have that even though I have mountains of evidence on trades on great companies like STX, HAL and a few others I was in right and never should have sold.

     

    It's too bad a guy like Joe Springer has to follow IMUC articles and leave comments apologizing for it's drop after recommending it. It's not Joe's fault. Success to us Dag. You're a busy guy and I promise not to wear out your inbox.
    30 Jan, 07:53 AM Reply Like
  • DAG1996
    , contributor
    Comments (3082) | Send Message
     
    Author’s reply » Yes, you're right, Joe. The psychologists call it "confirmation bias" ... only hearing/seeing the things that confirm what we have already convinced ourselves of ... extremely prevalent with all things related to money and politics especially.

     

    I agree it's too bad that it only takes one less than perfect call for some people to forget about ten times as many top-notch calls, but such is life. Success to you as well, Joe.
    30 Jan, 09:45 PM Reply Like
  • Xtabi
    , contributor
    Comments (28) | Send Message
     
    Thank you for this. It does help clarify your viewpoints.

     

    I think the only potential issue with the original article was the headline since some people draw conclusions from headlines alone. You did suggest buying in pieces so, if anything, people who are serious about investing in the stock should be happy for an opportunity to continue buying at slightly better price.
    30 Jan, 11:02 PM Reply Like
  • DAG1996
    , contributor
    Comments (3082) | Send Message
     
    Author’s reply » Xtabi, Thank you for letting me know this post was helpful. I agree that I should put more thought into the headlines ... they've never been a strong point for me and are often an afterthought.
    30 Jan, 11:23 PM Reply Like
  • mjtroll1
    , contributor
    Comments (829) | Send Message
     
    thank you for taking time to clarify (somewhat) your position. having said that I stopped myself out on close below 8/28/2013 low of 35.91..which so far is wrong decision.. at 13 times earnings which according to FAST graphs above the normal p/e ratio for last five years of 11.7 and eps growth rate of 10
    31 Jan, 07:39 AM Reply Like
  • DAG1996
    , contributor
    Comments (3082) | Send Message
     
    Author’s reply » mjtroll1, Please specify which part(s) of my explanation of my opinions inspired the "somewhat". That would be a great help to me for future articles.
    31 Jan, 01:07 PM Reply Like
  • mjtroll1
    , contributor
    Comments (829) | Send Message
     
    RELAX..keep in mind that most everyone on this blog (seeking alpha) are professional traders/speculators and understand the distinction between short/intermediate and long term investing. Also there are no absolutes only relative value judgments to make. Keep up good work
    31 Jan, 01:41 PM Reply Like
  • DAG1996
    , contributor
    Comments (3082) | Send Message
     
    Author’s reply » Actually, it's far from true that "most everyone" on Seeking Alpha is "professional" and even that "most everyone" on SA fully understands "the distinction between short/intermediate and long term investing." That's why I want to make my positions clear enough not to give the novice retirees wrong impressions ... they're just as important as the pros, if not more. Anyway, thanks for reading and for the kind words.
    1 Feb, 12:45 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.