Another Reverse Split?

Rite-Aid has been put on notice: its stock has been trading below the $1 borderline on the NYSE for the past month now, and must drag itself back over the line in six months or face delisting.

Faced with the same problem, Revlon made the same move just over a month ago - and their shares have recovered slightly since - but I commented at the time that it was the first time I'd seen that happen.

Given that Rite-Aid is still struggling to recover from its acquisitions, and the entire market is struggling to regain ground, I think it's unlikely they'll pull out of their nosedive in the near future, and a reverse-split will eventually occur.

I may be wrong about that ... or they may be able to effect a similar recovery after the reverse-split takes effect ... but I'm doubtful on both counts.

Weekly Summary

This past week was murderous to my portfolio - though given the performance of the entire market, I don't think I'm alone in this predicament:


Given the way things are going in the overall market, I'm going to have to deviate from my general strategy of dumping a position when it falls below 50% of its original value. Otherwise, I'd be dumping about half of my portfolio: DEXI, FEEC, RAD, IVAN, and FRE.

The wise guys are saying that this is the time to buy, as you'll make a killing when the market recovers. While that sounds like good advice, they've been saying the same thing for the past month, and anyone who's done so is sorely regretting it.

I'm going to wait for a full week of positive movement before I get any deeper into the markets, and I'll hold onto what I've got in hopes of recovering some of what I have already lost.

Insider Investment at Rite Aid

A week after trimming back its outlook for the current fiscal year, Rite Aid insiders are loading up on cheap shares:

[CEO] Mary Sammons and fellow board members Robert Miller and George Golleher purchased 1.48 million shares in open-market transactions this week. The price: $1 a share. Sammons bought 486,750 shares, while Miller and Golleher bought 500,000 shares a piece.

This is a significant vote of confidence by people who are "in the know" about this company's long-term potential. While I think it's going to take longer than I had hoped to turn a profit on this investment, I still expect I'll end up well in the black.

Rite Aid cuts fiscal 2009 outlook

Sometimes, my timing really sucks ...

Drugstore operator Rite Aid Corp. on Wednesday reduced its guidance for fiscal 2009 because of refinancing costs. The Camp Hill, Pa.-based company said it now expects net loss between 39 cents and 52 cents per share, compared with previous guidance for a loss of 34 cents to 48 cents per share.

While I still expect that the firm will eventually dig its way out of debt, its shares are sure to plummet in the short run, and since the price is getting close to the $1 mark, they may either have to reverse-split (which is never a good thing) or face the prospect of being delisted (ditto).

Weekly Summary

I've made a few acquisitions this week, moving some of the funds that were laying fallow in my account into companies that I hope will be more productive - but other than that, the overall value of hasn't changed dramatically from last week. Given the turbulence in the market, breaking even feels like a small victory


About half of my holdings are now big-board stocks that have gone south: Revlon, Rite Aid, Blockbuster, and Krispy Kreme. This is unusual, as my typical tactic for a penny stock portfolio is to invest in smaller firms whose growth will come from scaling up their operations rather than larger firms who are seeking to solve balance-sheet issues - but then, I'll take profit however I can get it.

Rite Aid (RAD)

Company:	Rite Aid Corporation
Web Site:	http://www.riteaid.com
Purchase Price:	$1.45
Current Price:	Click Here

Rite Aid Corporation, the nation's second-largest chain of retail drugstores, has been struggling under the weight of recent acquisitions, and today announced a first-quarter loss of over $150 million, sending its price on a downward spiral.

While the company is experiencing a severe case of indigestion, my sense is they can survive: they have been in business since 1927, currently operate over 5,000 stores, and have revenue growth of nearly 50% year-to-year - and while the loss seems significant, it's nothing that an $11 billion dollar corporation can't handle.

The company is already in the process of streamlining its operations to eliminate redundancies and market cannibalization, and I fully expect that they will show signs of recovery by the end of this year, and should be back in the black before long - and while the stock will probably take a while to recover completely, I expect to turn a fair profit within the next six months.