I increased my stake in GPS yesterday. I placed a limit order to buy 100 shares at $18.33/share on Tuesday when the price opened down 11% over night after management revised their Q1 earnings forecast. I had to wait a bit…but not too long to get filled.
I set the limit order during the low point on Tuesday, which was right around $19.00/share, so my that price represented another 4% drop from there. I wasn’t sure if it would execute or not, but my price was pretty firm. With 100 shares + $6.95 commission, that would make the cost basis for this purchase $18.40/share which makes the current $0.92 annual distribution an even 5% yield. If I’m upping my stake in the GAP I wanted to do it at a 5% yield. It was a good till cancel order which went unfilled Tuesday. I thought I might have to wait till the 19th when the company reports earnings.
But then the price kept dropping Wednesday, although much less drastically. It closed at $18.58 which was tantalizingly close to my limit. There was enough volatility Thursday morning that I actually got filled below my limit order. Technically shares opened at $18.12. My broker executed at $18.15, which isn’t too bad. It doesn’t look to me like it opened that low, but who knows what happens in the opening robot chaos.
May 12, 2016 – GPS Chart Courtesy Yahoo Finance
Oh well. I’ll take it. Of course, the price kept falling and is now down over 18% in the last 3 days. Ouch. Here’s hoping everything is priced in for their actual earnings announcement next week.
I have now invested a total of $3,340.90 into 154 shares, for a net cost basis of $21.69/share. This gives me enough shares to start looking at selling call options, but the strikes over my cost basis are a little too far out of the money for now. I’ll have to be patient. Hopefully we get a little bit of a bounce sooner than later.
I realize the company is struggling a bit right now with YoY and same store sales growth. But their balance sheet is so strong, I feel like the dividend is more than safe while they weather this storm, which incidentally, appears to be affecting the whole retail industry.
My thinking hasn’t changed all that much from when I formulated my original investment thesis, which I will paraphrase again as “basic bitches buying yoga pants represents a strong growth opportunity”. It’s tough to buy when everyone else is preaching doom, but that’s when you get the best sale prices. GPS is in the bargain bin at the moment, and I decided to go for it.