The drop over the past few days, while scary, does not even register as the most since this saga began in March. Can’t believe I am going to break out a chart, but we need some perspective.
If we look at the other periods, from June 5 to July 10 the stock saw a steady decline in value of 52%
The Aug. 12th to Sept 2 decline measured 23%. Sept 15th to 25th gave us a 18% drop.
This recent fall at its lowest point? 26%. As I write that is down to 20%.
People are worried about the severity and suddenness of the drop over no news. But, that is what is important, no news. We have a 4.5% drop in the S&P over the same time span and a stock that has risen over 900% since we bought in March drops 26% over a few days. There are a ton of cliches’ we can use to explain it “profit taking” , “lightening up”, “taking some money off the table” etc. Basically, people are selling. Let ’em, if it gets low enough, I’ll pick up more.
This is when time frame comes into play. Since I am not selling anytime soon (barring a significant court setback) the short term price action is meaningless save for it providing me opportunities to take advantage of large drops by picking up more shares.
If anything the news lately has been good:
From the WSJ:
General Growth Properties Inc. faces a complicated and arduous task in mollifying its many creditors and emerging from Chapter 11 bankruptcy protection as soon as next year. The mall owner wants to ensure it keeps its key employees on the journey.
The company, which owns more than 200 U.S. malls, recently received U.S. Bankruptcy Court Judge Allan Gropper’s approval for a “key employee incentive plan” that establishes a $10 million bonus pool to be shared by any of 46 designated employees if the mall owner emerges from bankruptcy by June 30, 2010. The bonus pool shrinks to $5 million if General Growth emerges between July 1 and Sept. 30 of next year. No bonus is awarded thereafter.
Those bonus pools are in addition to another $15.2 million of bonuses that General Growth executives can receive based on how much creditors recoup in the bankruptcy case. Those 46 employees can earn bonuses of 30% to 225% of their salary depending on what percentage of creditors’ claims ultimately is repaid in the bankruptcy case. For example, Chief Executive Officer Adam Metz could receive a bonus of up to 225% of his $1.5 million salary, and President and Chief Operating Officer Thomas Nolan could receive a bonus of as much as twice his $1.25 million salary.
A prolonged Chapter 11 eats away at shareholder equity as legal/court fees take their toll. This plan is a bit ironic though and the Board and management are large shareholder in the company, so in effect, they are rewarding management for doing precisely what they intend on doing anyway. No matter though, at the end of the day, an early emergence assures shareholders win big.
So, to answer some questions I got today in bulk…
No, I am not considering selling nor have I
No, there was not a negative court ruling today
Yes, I am holding on to the end
Yes, I had a buy order in today at $3.99, it did not get filled
What if it drops more tomorrow? I’ll be buying..
No, I am not worried. If anything I am pissed I missed the first dip below $4 today
Why am I not worried? I am not sure what there is too be worried about. I seldom worry about things that do not exist.