Wednesday, September 24, 1997
The Cracker Barrel
Lesson
by
Walt6807
CRACKER BARREL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBRL)") else Response.Write("(Nasdaq: CBRL)") end if %> was the first stock I ever owned. I bought it on the recommendation of my uncle who had owned it since the early 1980s and, of course, had made a mint on it. I bought CBRL in December 1992 at a split-adjusted price of $31.66. By June, 1993 it had risen to $34. From that point on it dropped... and dropped. I finally sold at $22.50 before it reached the bottom at about $16.
I believe that CBRL is a great company. It was great even when the stock price fell. During the decline, CBRL was rated "the best family restaurant" by Consumer Reports and it still fell. The service and quality never faltered. It still fell.
My mistake was that I did not understand the stock's valuation and what could move the price. So what did move the price? CBRL took a bold (though ill-advised) stand on the sexual orientation of its employees that led to litigation and predictions of huge punitive damage judgements against the company. Regardless of my personal opinion on the matter, the stock did not recover in the short- to mid-term. I do not know what eventually became of the litigation. My decision to sell was based on financial concerns and not moral issues. (When I feel like discussing morals and investment, I go to the Philip Morris message board.)
I'm glad I took my loss when I did. (My initial investment was only $1,000 since I was a neophyte investor just out of college.) I invested what was left of the money in a stock that I knew more about -- Intel, which my uncle thought was too risky in 1993. (Ha!) Even so, I'm not sorry that I owned CBRL. If you can't earn by owning a stock then at least you can learn from ownership. I did. Cracker Barrel was a good teacher. I might buy CBRL again in the future, but I would like to see it move past the high that it set in 1993. ( I'm not a technician, really.) Those investors who bought at the low of 16 have done very well. I'm confident that Cracker Barrel will do well in the long run, which is where my investment horizon is. I will do my part to contribute to the company's bottom line at lunch today as I travel cross-country on I-40.
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