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Portfolio No 11.

I wrote about Darden Restaurants (DRI) in April (Portfoli No 4).

DRI’s 4th Quarter results out yesterday evening “disappointed” analysts. Sales were reported at $2.22bn (consensus estimates were $2.24bn) and same restaurant growth was +1.6% (2.4%). DRI furthermore forecast 2020 EPS in the range $6.3-$6.45 ($6.46). These shotfalls may seem very small but shares overnight are down 4.6% to $112. The market is skittish.

How do I react?

Little has changed. DRI remains the company I praised in April. Q4 is a robust performance. DRI still trades well into the strong US consumer market. This remains a strong US centric company in an otherwise turbulent world market. However 2 factors concern me.

In the first place I cannot afford to lose money, one of my rules is to play safe and the market may overreact. Secondly the International scene could go anywhere in the next few days – POTUS and the US election, China trade wars, G20, Europe in collapse, Brexit, Iran and so on. So:

1. My first action is to trim my holding by 50% from a full 6% of the portfolio to 3% I am cutting my exposure and fortunately avoiding any loss – I originally bought at today’s opening price.

2. I will watch expecting to find a “bottom” reached in the next few days aound $105 – $110 and then, subject to any major event, I will buy into DRI back to 6%.

3. This decision needs to be taken before July 10. DRI has increased its dividend by 17% to 3% ($0.75) payable August 1 to shareholders of record on July 10.

4. It would be nice to have a 6% holding in July at a slightly reduced average price per share paying a dividend of 3%+. 

Hav a good day and watch this space, James.