Kohl’s stock has performed very well in the 4 months that I’ve owned it and may have already priced in a good portion of its presumed post-covid recovery. Given the uncertainty that still surrounds this company, the economy and the fate of the department store model in general, I decided to take my profits early.

Popular Delusions, Manias And The Madness Of Crowds

For those of you new to the investing game, this is it. This is the real McCoy. This is what a full-blown market mania feels like. Stocks are going public at insane valuations and then doubling on their first day of trading. The Russell 2000 has gone vertical. Penny stocks are now the most heavily traded securities on Wall Street. Companies with a good story to tell (but virtually no revenue or profits to speak of) are making shareholders rich. Bitcoin is headed to $100,000. Heck, why stop there? Call it hundreds of thousands.

If I had any skin in the game, I’d be out. But then I likely wouldn’t have been in in the first place. To a large extent, I’m a stupefied bystander here. The stocks I own have been doing well; getting partially caught up in all the excitement, but so far none have become obvious fodder for the Robinhood crowd.

I’ve been through many investment booms and busts over the years and have been happy to watch them play out from the sidelines. There is usually something I can buy at a price that still makes sense, away from the thundering herd. And this time, too, my portfolio is filled with a collection of what I think are still reasonably priced securities in sectors that haven’t got that alluring new-economy or ESG glow.

Back in 2000, this focus on old-school, value stocks worked wonderfully. The dotcom bubble burst in spectacular fashion while my value stocks came through the other side of the bear market with barely a scratch on them. I’m not confidant that this latest iteration of market madness will prove to be as forgiving.

Is There Anyone Driving This Bus?

I came across a reference to a company called Facedrive this morning. It’s a Canadian company that came to the market in 2019 and gets most of its revenue from a ridesharing platform similar to Uber or Lyft. They’ve also developed a contact tracing solution and have been getting into food delivery. All good covid-y type stuff. Which explains the $1.5 billion plus valuation. But I was surprised I hadn’t heard of it. The Canadian market is not very big and it was odd that a $1.5 billion company somehow managed to escape my attention.

So I checked their latest quarterly filings. Turns out the company had $266 000 in revenue last quarter. There are no zeroes missing in that number. Sales numbers like that would put the company about on par with the local diner just down the road from me. (Or at least would have, pre-covid). The restaurant may be losing money right now, but those losses likely don’t hold a candle to the $3.5 million that Facedrive burned through last quarter. On the face of it, the diner would seem like the better investment here and for any prospective investors out there, it’s currently up for sale for a good deal less than $1.5 billion. No wonder I had simply glossed over Facedrive in my previous reviews. Clearly, though, my lack of vision caused me to miss out on a real opportunity.

Sour grapes? No, not at all. (Okay, maybe just a bit.) There are huge pots of money to be made and lost out there. Until the music stops, some people will make out like bandits. I don’t have the skills to play this game, but I don’t begrudge the people who do.

However, I do see an end to all of this in the not too distant future and I have a growing urge to do something about that, partly because I am fearful that a spectacular market collapse could inflict significant collateral damage on my old-school value stocks and partly because I am as greedy as the next guy and imagine that at some point in the future, having some cash on the sidelines could position me nicely to take advantage of any bargains that might appear in the bubble’s aftermath.

Kohl’s On The Chopping Block

Looking through my roster of potential sell candidates, I settled on Kohl’s. The stock has performed wonderfully over the past four months, more than doubling from where I bought in. So far, so good. The company made $5 per share in 2019. When I bought in, I reasoned that a full recovery could lead to a share price of $60 or more. That was almost a 3 bagger from where I entered the scene. Enough of a potential payoff to balance out the risk that the road to recovery could be a bumpy one.

Here we are a few months down the road and the stock price, which is up around $45, has already priced in a fair chunk of that hoped-for recovery. However, the company has already hit a pothole. Most of the retailers I looked at in the third quarter managed to produce a profit. Quite a few were even enjoying record profits on the back of surging lockdown demand and a torrent of online sales.

But the department stores were struggling. It’s no secret that this format is facing an uncertain future. Much as I feel guilty doing it, I have to admit that the convenience of shopping on Amazon is a real game-changer. Kohl’s lost money again in their third quarter and while the stock price has recovered most of its covid losses at this point, I wonder if perhaps the cart has run ahead of the horse. Instead of waiting another year for this story to play out, I’m taking my short-term gains and parking them in cash until a new opportunity presents itself.

Full Disclosure: I do not own shares in Kohl’s, Facedrive, Uber or Lyft.