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First you take inventory and then you make sense of your runway:

Having and practicing patience, for an investor, can at times feel like having a split personality. You can hold a stock for a period of time, much longer than any other, believing that a turnaround will emerge shortly to rectify a lagging stock price OR you may jump the gun too quickly and enter a position on an equity that in retrospect you should have waited a little longer for. The problem is that no investor can foresee the future perfectly and we each make assumptions when evaluating the value of something we buy. Fundamentals for me are one of the hallmarks of an investing and value approach. Whether I’m investing for deep or enduring value I always concentrate on ensuring that I’m getting more than what I’m paying for and understand the risks I’m exposed to.

On Thursday I made an addition to my DivG portfolio by securing 200 shares in Canadian retailer Reitmans. At a time when many investors are running from retailers I’ve taken the contrarian perspective in the past six months and examined the market in North America for potential value. This led to purchases earlier this year of Loblaw (Value), Walmart (RSP) and examinations recently of Canadian Tire, Target and Forzani Group.

Reitmans took a hard hit in the past month of over 20% going from $19 down to a close of $15.50 yesterday on concerns of Canadian consumer spending, its operations under varying banners and their recent quarterly earnings that came out where earnings were flat and sales fell slightly. While the market expresses serious concerns about consumer confidence and spending habits I look towards fundamentals and valuation to assist me in an investment decision. Reitmans currently yields 4.7% with a payout under 45%, holds minimal debt, has product diversification across age segments and at a conservative EPS of $1.50 (7.5% drop) for 2009 trades at a future P/E of 10.3x.

I originally examined the stock in 2007 after it tumbled from a high of over $25 down quickly to the $16 range. At that time I felt the stock was fairly valued at $15 and placed it on my watchlist of potential stocks for DivG. After trading near $15 this week I took the opportunity to use a limit order just below that price and was fortunate enough to get a fill.

While the stock offers value at this time and price I should make it clear to readers that I do not consider Reitmans to be a core holding of my portfolio. At a current weighting of 4.5% (among 19 stocks) it gives me diversification away from a heavy weighting of financials and bumps the average yield of the portfolio above 3%. I likely won’t add to my position soon as I look to add 2-3 more stocks and anticipate RET.A to move back up to the $17-18 range over the next six months. If or when the stock reaches the mid $20 range again I will re-examine its valuation and determine if profit taking is in order.

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