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Pigs Get Fat, But Hogs Get Slaughtered

kroger

I often give you graphs telling you what to do in certain situation based upon the indicators I follow.

Well, today I want to show you what NOT following the indicators can do – particularly if you get greedy and want to play the market too cute.

Case in point: Kroger

If you haven’t been following Kroger, this formerly stodgy grocery store has transformed itself into an aggressive competitor of both Whole Foods and Walmart, providing both upscale options for the nutrition conscious consumer and a low price selection for the value conscious consumer. Their growth rate has become tremendous and they are now the country’s second largest retailer.

Its a company I’ve wanted to add to client portfolios for quite awhile, but I always wanted to buy it at the 50-day moving average. If you look at the graph above, I’ve annotated it with two green arrows showing the last two times this company hit the 50-day moving average in the past 12 months. If you look in the green box I’ve drawn, you can see that the price was moving down toward the 50-day moving average in recent days, but my indicators (circled in red) were flashing that the stock had fallen too much. I second-guessed them, because I was greedy and wanted to buy at that price thereby reaping the big rewards for client portfolios, and opted to wait for another day or two for the stock to go down a couple more percentage points and I’d buy it at the 50.

NOT HAPPENING…

This morning, Kroger announced incredible earnings (as I assumed they would) and the stock is up nearly 7% today to a new high. So, I am kicking myself because I wanted to buy it at a price my indicators clearly said was unlikely to be reached.

Indicators are not perfect, as I have found out over the years, but they are consistent enough to be relied upon as inputs to the decision process, particularly when trying to time buy/sell decisions. I just did not rely upon them.

There is an old saying in the investment business: “pigs get fat, but hogs get slaughtered.” As you can probably guess, it means making money is great, but don’t get greedy as you always lose out.

After 30+ years in the business, I continue to learn my lessons (and relearn them too sometimes).

Kroger goes back on my watch list and we move on to the next opportunity.


Can anyone guess what this video has to do with the blog post? Its obscure but if you’ve seen Pink Floyd in concert you will know exactly what the answer is.

Mark