Yesterday I sold my Petsmart (PETM) stock. This is not because I think anything is wrong with the company, or that the stock is overvalued. When I bought PETM on October 8, 2009 [See I buy Petsmart] the price was $22.31 per share. I thought that grossly undervalued the company. Since Petsmart pays a dividend, I bought it for diversification against my technology-heavy portfolio, with a view to long term gains. For some reason PETM had not seen the stock price appreciation in 2009 that others had.
That changed after Q4 2009 results were reported. I was able to sell the stock for exactly $30.00 per share. That gave me 34.5% appreciation in a few months. I had less cash than I had wanted in my account; now I have cash for some other bargain.
In fact I bought a little bit more Dot Hill today, as it was having a fire sale after investors misinterpreted HILL Q4 results and plans for 2010. That is a more complicated story, and a riskier company, than Petsmart; I hope to write it up in the next few days.
I think small, independent investors like myself, who are good at research and analysis, usually do best with longer term investing. Since I would have been happy if PETM had appreciated 34.5% over a three year period, in a sense I did keep it for a long term.
The bargain basement is thinning out pretty fast these days. I am keeping my eye open for companies that I think will grow revenues and profits nicely over the next one to five years, but have low P/E ratios today. Mostly that will be small and medium capitalization stocks these days, but wait long enough and you will find that on occasion even large cap stocks are mispriced (both over and under) by institution investors and those crazy computer black box trading programs.
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