Moat Investor

Panera (PNRA) Profit Takers

The profit takers are bringing Panera down today, have you seen it? If you’ve been reading Moat Investor since our relaunch as a Pertain Media Group site, you’ll know that Panera is the value stock we’re excited about right now. Why aren’t we excited about all value stocks at the same time? Good question. It’s because most value stocks are valued correctly. A real Moat Investor isn’t just looking for a dependable moat like the brand moat that Panera is establishing; Moat Investors also have the patience to wait for the stock price to drop down to a margin of safety. I believe Panera’s price is well below the margin of safety.

What happens is the investors on the Street are all investing for different reasons. In the long-run, those reasons are fairly rational and relate to estimates of future growth, especially in free cash flow and equity. But in the short-run, investors may dump a stock for a lot of irrational reasons, like today, where I believe investors are dumping Panera to take some profit. Some of these investors bought in a month or so ago when the price was in the mid-50s and now the price is hovering around $60-61 per share. That means that these investors made a 10% return in a month or two and want to realize that return without sitting out the long-term ups and downs. That is fine by me for two reasons.

First, when these investors send the price down in the short-run, it allows me to snap up more of Panera at a bargain. Second – here’s an important confession – I myself am one of those profit takers. That’s right, I sold my shares of Panera a couple of days ago anticipating this drop. Look at the technicals. The price is under the 10-day moving average. The Slow 14/5 Stochastic has dipped into the negative meaning the stock is over-bought. The MACD is about break even, but is dipping negative. If you haven�t yet, sell now and get your profit, too. You can buy in later when the stock is lower and make even more money.

But what if the stock goes up? That is always a risk. Remember, nothing you read here is meant to be construed as the investment advice of a professional. Frankly, I think investment advice is worthless anyway. The purpose of this site is to teach you to think for yourself and thus beat the market and the mutual fund traders who cannot be as nimble as you or I can. If you think it has legs and is going up, go ahead and stick with it. It’s all up to you. But it looks like it is going down and that is usually because of two reasons. One reason is profit takers, of which I am one. The second reason is that there is information that we don’t know about that is about to hit John Public’s radar, and John Public isn’t going to like what he hears and he’s going to sell all of his stock. I would rather be safe and sell than greedy, hang on and suffer the consequences. Remember Warren Buffet’s Rule 1: Don’t lose money.

I’ll be waiting for the market to return to Panera very quickly over the next week or so, maybe longer. You should wait, too. Watch the price drop and the MACD and Stochastic will recover. Then hang on and we’ll ride that baby up again. Panera has incredible long-term value to offer because of its growth potential.