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Last week, I talked about my recent purchase of GameStop (GME). I put forth my reasoning on the trade, mentioning the Christmas shopping season as being a potential catalyst for capital appreciation.
Well, the trade has gone horribly wrong this bleak Monday session. In case you didn't hear the news, the video-game chain sold off in a big way. As I write this, shares are off by a buck, and are priced at $24.32. The low on the day is $23.75. Volume, while not in panic-mode, is above average, and I expect it to possibly accelerate toward the end of the day.
Honestly, I was taken aback when I saw GameStop was so in the red. I searched for news. Apparently, all this business about Black Friday not being good enough has scared away the bulls.
Seriously, though, investors are selling GameStop enough to cause a 4% drop (or worse, depending on when you last checked the stock)? A check of several retailers shows the retail carnage not being so bad in other areas. Sears (SHLD) is down less than 2% as of this writing. Wal-Mart (WMT) is only down 0.6%. Best Buy (BBY) is even with the previous session's closing price.
Why is my poor trade being picked on so badly? I guess there's a feeling out there that video games won't be as popular a gift category as previously thought. Or, maybe this is a case of hedge funds booking profits ahead of the holiday rush in conjunction with bets against the business.
I have to believe the selling is way overdone. Plenty of traffic will head GameStop's way. Not only will the retailer sell a lot of new-copy games, but used-copy inventory will move briskly at the hands of the frugal consumer.
So, what did I do today in the face of the attack on my stock? I bought more. Did I make the right decision? I think the shares will rebound, but I will admit, my confidence has been shaken. If worse comes to worst, this position may simply turn from a trade into an investment. I hope that doesn't happen, but for the time being, I am still behind this thesis.
Disclosure: I own GameStop; positions can change without notice.
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Reader Comments (Page 1 of 1)
12-01-2009 @ 5:31AM
Dan Barnett said...
Steve,
Don't worry. Because you are the expert in the field, the God of Hubris will mock you by having the stock drop for a bit. It's to keep you humble. Essentially no one can predict the move of any individual stock on any given day. You did the best anyone can, researched the stock, found a comfortable buying price, and pulled the trigger. So relax and enjoy.