Taking profit in Dollar General

My earlier post talked about market overreaction from Amazon’s purchase of Whole Foods. Many grocers’ share price fell 5-10% on the day of the announcement.

I bought Dollar General (DG) during the dip. On that day (16 June 2017), DG actually reached the low of 65.97. That’s nearly 9% from the prior day’s closing price of 72.32. I bought it at 70.75 on its way up. I’m a terrible timer, so I always miss out the bottom.

Two days ago, I sold it at 76.96. Including dividend of 0.26, the gross return in USD was 9%. But the SGD net return was only 5.9%. More than 2% points was forex loss. USD has been weakening since the start of the year, and it hurts my US and HK portfolio.

I sold because I’ve achieved my objective. I bought because I believe the market was selling in panic. DG is doing ok fundamentally and was trading at the lower range of my valuation estimate on that day. So, I thought it’s safe to buy, and if the effect of panic selling reversed, I could stand to benefit. I’m lucky that it took relatively short time, 1.5 months, to recover.

The grocery companies are reporting their Q2 results within the next two weeks, and I have no idea whether it’ll be good or bad result. Since I’ve achieved my objective to profit from the panic selling, I decided to sell out. This will also avoid the volatility in earnings release. Will allocate the capital to other stocks that I think more attractive.

Grocers - Share Price - 2017-08-14
Source: Google Finance

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