Some Thoughts on GMCR and Holding Through Earnings

People ask us all the time, “You hold stocks through earnings? Isn’t that risky?” The answer is yes. But so can be crossing the street. You try to do it when the odds are on your side. Trying to traverse the Cross Bronx Expressway at rush hour isn’t advisable. We try to avoid rush hour.

First, we only hold during market uptrends. And we only hold the very best performing stocks with a recent history of earnings acceleration and beats. And we like to have a cushion of profit, preferably around 10%. Our experience is that if you follow these rules the winners far outweigh the losers, and the damage on the losers is limited.

Last night one of our holdings that we've profiled on this page, GMCR, reported sales that were a bit light. But they guided higher for next quarter and next year. The stock was pummeled after hours.

One of our rules is that no matter how much your stomach turns you never EVER sell in the pre or post market. Liquidity can be limited and is often dominated by retail investors, the reaction of whom is often times the polar opposite of how institutions will react during the next session.

Sure enough the bullishness of the market has saved the day for GMCR. From a post market low print on our chart of $58.99 the stock has been over 10 points higher during today’s session.

Will GMCR continue to be a stock worth holding? We don’t know yet. It will depend upon the market’s continuing evaluation of its prospects. But for now it’s an ongoing hold as the market sorts things out.