Armanino Foods -- keep a steady hand

I few days ago, i wrote an update on Armanino Foods of Distinction, a small California based food company (symbol AMNF on the Pink sheets). The company had announced both a special dividend and a stock repurchase plan that would reduce outstanding shares by up to 6%. In the two trading days since then, volume has soared. yesteday over 100,000 shares traded and so far today the total is over 70,000. These are extremely high volumes for Armanino. While one cannot tell for certain, both the volume increase and the sizes of the transactions indicate that at least some of the activity is due to the company getting active in the market. During these two days, the stock price has risen by about 7%. Also, there have been no big pull backs on any volume; nearly all of the trades have been purchases.

It is at a point like this that many folks get itchy and decide to take profits in the stock. In my opinion, now is not the time to sell. While the old adage that "no one ever lost money by taking a profit" is true, this is one of those times when holding off selling makes the most sense. The company's purchases provide a floor for the stock. Further, in a short time, there will be a dividend that is about 3% of the current price. Selling now forfeits that dividend. Most important, the company's actions indicate that the current quarter is going to have outstanding results. The Armanino management has always be quite conservative, so for them to declare a special dividend and commence a buy back, it must mean that we are going to see a blow out quarter coming up. Since the Price Earnings multipl is already very low, a rise in earnings will only mean a further large rise in the stock. Indeed, if the latest events in the stock get it noticed in the investment community, there could be another bump up as investors jump aboard.

In short, there is much more up side in this stock than there is risk of any downside. While I would usually want to take some of the profits off the table, this is one time when I strongly recommend holding on until at least after the ex-dividend date (September 29, 2010).