Brighteyes

Gamestop: Consensus Needs to Catch Up to Reality

Two weeks ago, I sold 3/4 of my GameStop position for the reason stated in the title. Let me go into more detail. I was sitting on a load of profit and I wanted to capture some of that profit and at the same time, reduce my retail allocation a little. I converted the proceeds into more shares of Schlumberger (SLB: NYSE) that I am projecting to outperform through 2009.

I believe the consensus is overvalued at this point as suggested in the article. Between the recession, the weak dollar, high gasoline prices and dropping consumer confidence, GameStop earnings and revenue will decline caused in part, by the fact that the new Generation console rush is old news. I like GameStop and their management is good so it is not likely that they are near failure, but the current price is not worth the valuation and near term potential.