If you buy stocks, invariably there is in your portfolio a stock which has seen better days, but you have kept to because you believe there is value in it. At one time, the company was a leader in its industry and you bought it anticipating it will still maintain its leadership. The industry changed , but you did not sell because there must be value to someone and it could come back in a different form. It is possible, but rare for companies to come back for you to sell at a profit.
In an article by David Porter of the Associated Press, many people will remember shopping at Kmart. For there once was over 2,000 Kmarts across the US and at the moment 3 still exist Kmart was home of the blue light special, product lines by Martha Stewart and Jaclyn Smith (Charlie’s Angels fame) and many other staples which people regularly bought and people spent time in the stores.
Kmart’s decline has been slow but steady over the years with falling sales, changes in shopping habits and the competition of Walmart (with its low prices) and Target ( with its trendier products). In recent years the competition also includes Amazon.com and shopping on line.
Kmart filed for Chapter 11 bankruptcy in 2002, it was later bought by Sears which saw value in its real estate, not everything bought by private equity, in this case Hedge fund manager Edward Lampert, is successful. Sears filed for Chapter 11 bankruptcy in 2018.
Professor Mark Cohen, director of retail studies at Columbia University in New York City, said trying to compete against Walmart on price was a foolish strategy. In the case of Kmart everything they used to sell, people were buying from Walmart and Target.
Linking to dividend paying stocks, when you buy a stock you see value and hopefully the market sees value to. One method to ensure you always see value is having relatively simple metrics which tell you, whether you love the stock or not, does in mean the criteria to continue to own. A simple method is does it make a profit to pay a dividend? if yes continue to hold, if no find alternatives or sell it and buy something else. You can easily watch companies try to come back and be a dominant force and that is a wonderful business story. The reality is many do not, as an investor you need to know when to sell equally as important as what to buy.
There are more questions than answers, till the next time – to raising questions.