I opened a position in Guess? (GES) back in June at a price of $25.44. Its yield was lower than my entry criteria so I offset that by pairing it up with a purchase of a higher yielding stock so that the average yield met my target. The position was opened based on my estimating that the stock was trading with more than a 20% margin of safety to its fair value.
Now while I don't expect Guess to ever be a core holding in my portfolio along the lines of Coca-Cola or Johnson & Johnson I do plan to hold it for as long as it continues to pay an increasing dividend. Even so major short-term movements, either up or down, should be paid attention to. Major movements up could provide an opportunity to sell and invest the gains in a different (and undervalued) dividend stock while major movements down can indicate either a buying opportunity or a need to exit the position post haste.
When Guess missed earnings this week it resulted in a massive sell-off that left the stock closing more than 18% down at Friday's bell from where it opened on Monday. Here is what that looked like in picture form:
There it is folks: margin of safety in action. Learn it, live it, love it.
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