dumb money, page-66

good thing for those who didn't sell at ANY price! I wrote about it here:

https://alphainvesting.net/2016/09/03/another-wipeout-from-surfstitch/

I first wrote about Surfstitch Group (ASX: SRF) just two weeks ago but I would be lying if I said the full year result wasn’t a surprise. While, the net loss figure was less concerning given that this was driven by almost $100m of non-cash impairments, the cash burn rate was higher than what I (and the market) had expected and hence the share price reaction. The implication of this is that the margin of safety has been eroded and my conviction in the stock has certainly faded. However, at the lows of around 10.5c-13c seen last week, I mentioned in my comment here that I didn’t think there was much point in selling given that all the bad news had already been factored in. It is my view that given that Mr. Sonand (CEO) has just taken over the reins since May 2016, he has likely taken this reporting period as an opportunity to clear out all the skeletons in the closet, setting himself up for an easy hurdle after a full year.
Experience tells us that markets often overreact and by maintaining composure, so our Real Money Portfolio held on to the stock, only to see it recover 60% from its lows over the past 3 days. Only time will tell as to what extent this business can be turned around but we’ll continue to monitor developments closely – particularly around the legal issues the business is dealing with.
For disclosure, I won’t be buying more but I won’t be selling unless the price is compelling.