What a whirlwind I've experienced in retail over the past 11 months or so. Normally a buy and hold investor (aka a dinosaur), I've been "renting" quite a bit of down and out specialty retail since the market determined prematurely last summer that the industry was all but dead. This led to positions in Hibbett Sports (HIBB) , Vera Bradley (VRA) , Big 5 Sporting Goods (BGFV) , Fossil (FOSL) , and CATO Corp. (CATO) , all names that under normal circumstances I likely would not touch. But these were not normal circumstances, and markets, at least temporarily, appeared to have badly mispriced these names, and others in the sector.
The stock's recoveries, however, have been much quicker than I'd anticipated, and I've been greatly reducing exposure to these names. That does not necessarily mean that there is no meat left on the bone; I am typically early to the party, and early to leave. I may buy into a failed growth story once the growth crowd has given up and moved on, but if the name in question does recover, I may also be out of it just when growth investors rediscover interest.
On Friday, I closed my position in fashion retailer CATO. Including the ample dividend, shares were up nearly 130% since I initiated the position in early March. That was a much quicker end to the story than anticipated. I took notice on July 12th when shares fell as much as 18% intraday after the CATO reported flat same store sales for June. While it appeared that another mini-retail Armageddon may have been starting that day, as other retailers such as L Brands (LB) , parent of Victoria's Secret, also were hit hard, CATO recovered, and was trading at a 52 week high late last week. However, I decided to pull the trigger, happy with the gains, and ready to move on to try and find some other bargains which is not easy these days.
Keeping score with specialty retail positions, in addition to CATO I am out of Fossil. In January I trimmed exposure to Hibbett, and currently maintain about 35% of the original position. I also still hold small positions in VRA and BGFV. Overall, however, the sales of FOSL, CATO, and partial HIBB sale have significantly reduced overall specialty retail exposure significantly. That does not mean the party is over, just that I was ready to move on. It certainly was a great run.
Now comes the hard part, finding new opportunities in a market where value is quite scarce these days.
