Now, there are some important lessons here. First, the supermarket space has gotten incredibly hard lately, a combination of dollar stores becoming more competitive in name-brand offerings, Target (TGT) and Wal-Mart (WMT) moving aggressively into the space and Whole Foods (WFM) taking the high-end consumer from mainstream shops such as Kroger (KR), Safeway (SWY) and Supervalu.
But second, and most important, is that sometimes outsized yields like Supervalu are out-and-out red flags signaling their own reduction or elimination. Before blindly buying into management's assurances, before thinking, "How can I miss with that yield protection?", do the homework. Supervalu was clearly in a long-term spiral down, something that told you to be more skeptical of the company's "confidence" in the dividend than you might otherwise be concerned about.
To me it's another clear-cut case of the need for not buy-and-hold, the preferred conventional wisdom of graybeards everywhere, but buy-and-homework. If you had done the homework, I believe you could bet that management couldn't fulfill its assurances, and you could have sidestepped today's hideous losses, the worst in the S&P 500.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
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