A Reader Writes: "What is your take on LaBarge?"
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website.

A friend of mine and a regular blog reader dropped me a line today about La Barge (LB). La Barge is a recent stock pick of mine, in fact, I posted La Barge (LB) on Stock Picks on 8/19/05 just six days ago when it was trading at $15.91/share. LB had a terrible day in the market, closing at $13.38, down $3.26 or (19.59%) on the day. Which leads me to my friend, Bob K.'s question. He wrote:

Hi Bob,

What is your take on La Barge? I thought their 4th quarter numbers announced today were impressive. They announced a buy back of 1 million shares (which should stimulate the price). yet the stock has fallen almost 20% today. Is it time to sell? I continue to enjoy your blog.

Thanks,
Bob

Well Bob, thanks for the kind words about the blog. And if you did buy some shares of LB, this reveals the volatility of stocks and the potential for losses when a company disappoints. That is the role of a portfolio with multiple issues, to dampen the peaks and valleys of individual investments.

After I opened this email, I went on a search to try to figure out what happened. If you read through the 4th quarter 2005 earnings report, you will first see that sales jumped 10% and earnings increased 14%. So far so good. Where we hit the glitch is down further into the report under the title "Outlook and Commentary" where Mr. La Barge writes:

Mr. LaBarge concluded, "Based on the strength of current backlog and the healthy array of new business opportunities in the pipeline, we expect to achieve double-digit growth in fiscal 2006 full-year sales and earnings. However, we anticipate first-quarter sales and earnings per share will be down slightly from the prior-year's levels due to several customer-requested delays in certain planned shipments. We are projecting fiscal 2006 first-quarter sales in the range of $41 million to $42 million and diluted earnings per share of $0.12 to $0.13, compared with sales of $43.6 million and diluted earnings per share of $0.15 in the fiscal 2005 first quarter."

I added all of that emphasis for effect. But one of the biggest things about stock prices is about expectations and the street hates any sign of disappointment. And this was a warning about the next quarter being light on both revenue and earnings.

What should you do? Well that is certainly up to you. In my trading account, I sell stocks, even sometimes after owning them a day, if I hit an 8% loss. Should you? The rest of the report states that the following quarter should be quite strong. But there is something called the "cockroach theory" of investing, which goes something like this: "If you see one bad result it is like a cockroach, there are likely to be many more hidden elsewhere."

Bob, please remember that I am truly an amateur investor, so I too face the same problems of losses in investments. The secret overall, imho, is to minimize the losses, selling on set loss limit points quickly, and selling your gainers slowly.

Thanks again for visiting and I hope that you continue to read and write in...I do like the email...and hopefully next time it will be about good news!

Bob