Looking to raise some cash, I sold off my holding in Medifast .

It’s getting ugly out there. The Russell 2000 is now down over 20% from where it was a couple of weeks ago. The Saudi’s opened up the taps on the weekend, sending the price of oil crashing. The coronavirus seems to rapidly be spreading out of control. The credit markets are showing signs of stress. The energy, hospitality, retail and financial sectors are all taking it on the chin.

And it could get worse. Much worse. When I was picking up some groceries yesterday, I noticed that store shelves were already starting to run low on staples like rice and beans. Quarantines may be coming to a community near you. There will be massive economic disruption. It’s no wonder that stock prices are falling. They could have much further to fall still.

As a value investor, this kind of market panic would normally fill me with a giddy sense of excitement. And it has, but that is tempered by the very sober realization that this could be a big deal. No one has gotten sick yet in my community but when the virus shows up on my doorstep, scooping up bargains in the market may be the least of my concerns.

At the moment, however, I’m still removed from the very real side of this crisis and all I’m seeing are numbers. I’ve been scanning my spreadsheets, looking at the airline and energy sectors for companies I might like to add to my portfolio if the prices get low enough. I’ve been running my screens, looking for any other stocks that might be taking collateral damage. There are some intriguing prospects out there but I’m not jumping in yet. My sense is that it is early days still. The really bad news may still be months away when companies first start to report on the damage that’s been done to their top and bottom lines.

Meanwhile, it would be nice to have some dry powder to take advantage of any bargains that might present themselves. True to form, my portfolio of cheap stocks has been tracking the market lower. As unfair as it seems, value stocks don’t typically offer any protection in a bear market. Cheap just gets cheaper. If there are any bargains to be had in this meltdown, I might be stuck with simply selling one of my existing holdings at a rock bottom price to buy a different stock at a rock bottom price. Which is not terribly satisfying.

So I made the decision to lighten up on a few things this morning to raise some cash in the event that this does morph into an even more severe catastrophe. I’ve brought my cash holdings up to 20% of the portfolio and plan to stick at that level for a while as I see how this all plays out.

As part of the liquidation this morning, I sold my Medifast stock. (At around $74.50 a share.) I was actually encouraged by their most recent set of year end results and was feeling better about owning this company going forward. Shortly after I bought this stock, back in the fall, they announced that they had been hit by a carefully organized fraudulent attack on their credit card ordering system which punished their earnings and, more importantly, disillusioned many of their home coaches who thought they were making real sales that were subsequently rejected. They had to slash prices and offer incentives to keep these coaches and their customers on board, but listening to the conference call and reading through their fourth quarter results, it sounded as if this unpleasant episode was behind them and my hope was that they were back in growth mode.

However, I said “hope”. Like many companies, they are going to be challenged this year. Scanning though my list of holdings, Medifast looked to be one of the least undervalued. Of course, valuation depends very much on the assumptions you use. If I were willing to ascribe a high growth multiple to this stock and were willing to take management’s guidance for significantly improved earnings this year at face value, then there could be plenty of room left for share price appreciation here. But I wanted to sell something and, I’m sorry Medifast, but you looked like one of the least undervalued of my many beaten down holdings.

So Medifast is gone. I also lightened up on a couple of my other holdings. I now have some cash in my pocket and am ready to go shopping if the right opportunity presents itself.

Full Disclosure: I do not own shares in Medifast.