Mastercard Inc (MA), Family Dollar Stores, Inc. (FDO): How Jim Cramer Loses Even When He Wins

Current recommendations

Currently, Cramer is reiterating his suggestion to sell Family Dollar Stores, Inc. (NYSE:FDO). This comes after he recommended buying Family Dollar in 2008, selling in 2009, buying again a couple months later, and then selling again this year.

FDO Total Return Price data by YCharts

If you had just bought and held when he first recommended it, you’re up almost 300% in five years. In 2009, Cramer urged investors to sell because of Dollar General Corp. (NYSE:DG)‘s IPO and an improving economy. But after the stock took a 20% dip he said it was time to “buy buy buy.”

Selling a stock due to short term pressures, or buying into a stock just because it takes a dip isn’t the way to invest. I would consider Family Dollar based on different factors. Over the past five years the company has grown revenue 81%, and net income 47%. In the fourth quarter, EPS is expected to grow 20% year-over-year. All this and the company’s P/E is below the industry average.

On the other side of the sentiment coin, Cramer suggested buying Five Below Inc (NASDAQ:FIVE), pointing out that the stock has more than doubled since its IPO. I agree that Five Below Inc (NASDAQ:FIVE) is a good buy, but not for that reason.

Five Below Inc (NASDAQ:FIVE) grew annual net income 25% in 2012. The company operated 244 locations by the end of fiscal 2012, but looks to add 60 new locations this year — a 25% increase. All current locations are in the Eastern United States, meaning there is still plenty of growth opportunities in the west. While its forward P/E is 3 times times that of competitor The Buckle, Inc. (NYSE:BKE), it seems justified considering the growth.

Cramer will likely suggest selling this stock within a year. Rather than looking at short term pressures, keep an eye on growth and earning trends before selling out too soon.

One Fool’s conclusion

Buy-and-hold investing isn’t dead. It’s easy to trick ourselves into thinking that in these modern times we have the tools to “out-trade” the thousands of day-traders trying to time the market as well. But as we’ve seen, the best strategy is still to buy great companies and hold them for the long-haul.

The article How Jim Cramer Loses Even When He Wins originally appeared on Fool.com.

Jon Quast has no position in any stocks mentioned. The Motley Fool recommends MasterCard. The Motley Fool owns shares of Mastercard Inc (NYSE:MA). Jon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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