This post on French Connection is a mirror image of my earlier post on Games Workshop. I probably have less confidence in French Connection than any other share in the Thrifty 30.

Applying my newly transcribed guidelines for selling:

1. Give a company three years to prove itself

French Connection has almost had three years. I added it to the portfolio in April 2010. I’ve been quite patient…

2. Resist selling a share until you have found a replacement for it

No replacement lined up unfortunately, so the reason for ejecting it (3 or 4) is going to have to be compelling.

3. Sell if you were wrong about the company’s asset value or earning power

I was wrong about its asset value because I failed to consider the value of its leases, which blew apart my valuation.

4. Sell if you’re confident it’s expensive

Although I’m no longer confident French Connection shares are cheap, I can’t say with confidence they’re expensive either. It’s not cheap on a liquidation basis, but assuming the company recovers it might well be cheap on an earnings basis. Since I’m unimpressed by French Connection’s recovery plan and my confidence in management is diminishing at about the same rate as its cash reserves, that’s a big ‘if’.

I wouldn’t add French Connection to the portfolio today, but now it’s in I’m reluctant to eject it. Generally, I prefer to wait for the full year results to judge, and since I don’t have another company lined up to replace it I have a second reason to wait.

With Games Workshop I liked everything about the company apart from the price. With French Connection I like little about it, and can’t judge the price. Near opposite scenarios, same conclusion.

I have annotated the French Connection entry in my portfolio table with an 'S' to indicate that next time I want to add a company to the portfolio, Games Workshop is one of the companies I should consider ejecting.

I’m deferring a decision on Metalrax until the full year too. It’s only been in the portfolio a year and a half.