BJ’s Restaurants, Inc. (BJRI) took a jump Friday as earnings came in better than expected. The shares were up more than $4 per share, to almost $35 per share. This is nice to see because I have quite a few shares of BJ’s scattered between my regular and retirement accounts. I have also been planning to write covered calls on some of the shares, but the price has been too low. I may take advantage fo this jump to write some calls on Monday. I could probably sell the August $35s for $0.80 per option, or $800 for 1000 shares. That would be a return of $800/$35,000 = 2.3% for the month, or about a 27% annualized return. Then again, I may just sit pat since I usually find I do better if I stay long than if I write covered calls.
BJ’s is one of my longterm, core holdings, despite it not getting very much love until Friday. Even after the jump, one columnist on Motley Fool didn’t think much of the move. The reason that I like BJ’s is that they have a great business that has been successful at increasing earnings, plus they have room to expand. I therefore plan to hold it both in good times when all of the newspapers and investing sites are recommending it and during the down times when everyone is panning it. I don’t know when it may make a big jump like it did Friday, so trying to jump in and out of the stock would be very risky.
During down times I accumulate more shares. I have faith in the business, so when the shares drop and become inexpensive, I buy more. I may sell a few shares, or write covered calls on some of the shares I hold, if the price shoots up to the point where it is expensive relative to expected earnings. I still keep a core position, however.
So would I ever sell? I follow the annual reports and watch the commentaries in Value Line Investment Survey, which come out about every three months for BJ’s. I don’t worry about short-term impacts like dips in the economy or small missteps. I see what management and Value Line thinks of the longterm prospects. As long as it looks like the company will continue to grow, I’ll hold on. If it looks like they have grown about as much as they will, or if it looks like a new management team is changing the fundamentals of how the company is run, I’ll probably sell out. Otherwise, I’ll stay in, taking out money here and there.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.