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Investing Like Dilbert

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June 07, 2010 – Comments (34) | RELATED TICKERS: BP , BRK-B , AAPL

This weekend I enjoyed reading "Dilbert" cartoonist Scott Adams's essay titled Betting on the Bad Guys.  Here's the essence of it in case anyone is unable to download the essay from the Saturday, 6/5/2010, edition of WSJ. (Mr. Adams's views on some companies do not necessarily mirror my own thoughts.)

When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week.

People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How's it feel to be a disgruntled victim?

I have a theory that you should invest in the companies that you hate the most. The usual reason for hating a company is that the company is so powerful it can make you balance your wallet on your nose while you beg for their product. Oil companies such as BP don't actually make you beg for oil, but I think we all realize that they could. It's implied in the price of gas.

I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers. I remember the day I learned that BP was using a submarine…with a web cam…a mile under the sea…to feed live video of their disaster to the world. My mind screamed "STOP TRYING TO MAKE ME LOVE YOU! MUST…THINK…OF DEAD BIRDS TO MAINTAIN ANGER!" The geeky side of me has a bit of a crush on them, but I still hate them for turning Florida into a dip stick.

Apparently BP has its own navy, a small air force, and enough money to build floating cities on the sea, most of which are still upright. If there's oil on the moon, BP will be the first to send a hose into space and suck on the moon until it's the size of a grapefruit. As an investor, that's the side I want to be on, with BP, not the loser moon.

I'd like to see a movie in which James Bond tries to defeat BP, but in the end they run Bond through a machine that turns him into "junk shot" debris to seal a leaky well. I'm just saying you don't always have to root for Bond. Be flexible.

Perhaps you think it's absurd to invest in companies just because you hate them. But let's compare my method to other ways you could decide where to invest.

Technical Analysis:  Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.

Investing in Well Managed Companies:  When companies make money, we assume they are well-managed. That perception is reinforced by the CEOs of those companies who are happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish.

Track Record:  Perhaps you can safely invest in companies that have a long track record of being profitable. That sounds safe and reasonable, right? The problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance. 2) You need to consider a company's track record.  Right, yes, those are opposites. And it's pretty much all that anyone knows about investing. An investment professional can argue for any sort of investment decision by selectively ignoring either point 1 or 2. And for that you will pay the investment professional 1% to 2% of your portfolio value annually, no matter the performance.

Invest in Companies You Love:  Instead of investing in companies you hate, as I have suggested, perhaps you could invest in companies you love. I once hired professional money managers at Wells Fargo to do essentially that for me. As part of their service they promised to listen to the dopey-happy hallucinations of professional liars (CEOs) and be gullible on my behalf. The pros at Wells Fargo bought for my portfolio Enron, WorldCom, and a number of other much-loved companies that soon went out of business. For that, I hate Wells Fargo. But I sure wish I had bought stock in Wells Fargo at the time I hated them the most, because Wells Fargo itself performed great. See how this works?

Do Your Own Research:  I didn't let Wells Fargo manage my entire portfolio, thanks to my native distrust of all humanity. For the other half of my portfolio I did my own research. (Imagine a field of red flags, all wildly waving. I didn't notice them.) My favorite investment was in a company I absolutely loved. I loved their business model. I loved their mission. I loved how they planned to make our daily lives easier. They were simply adorable as they struggled to change an entrenched industry. Their leaders reported that the company had finally turned cash positive in one key area, thus validating their business model, and proving that the future was rosy. I doubled down. The company was Webvan, may it rest in peace.

But What About Warren Buffet?  The argument goes that if Warren Buffett can buy quality companies at reasonable prices, hold them for the long term and become a billionaire, then so can you. Do you know who would be the first person to tell you that you aren't smart enough or well-informed enough to pull that off? His name is Warren Buffett. OK, he's probably too nice to say that, but I'm pretty sure he's thinking it. However, he might tell you that he makes his money by knowing things that other people don't know, and buying things that other people can't buy, such as entire companies.

People Love Berkshire Hathaway And That Has Done Great  I'm not saying that the companies you love are automatically bad investments. I'm saying that investing in companies you love is riskier than investing in companies you hate.  Second, take a look at Berkshire Hathaway's holdings. It's a rogue's gallery of junk food purveyors, banks, insurance companies and yes, Goldman Sachs and Moody's. The second largest holding of Berkshire Hathaway is … wait for it … Wells Fargo.

Let's talk about morality. Can you justify owning stock in companies that are treating the Earth like a prison pillow with a crayon face? Of course you can, but it takes some mental gymnastics. I'm here to help.

If you buy stock in a despicable company, it means some of the previous owners of that company sold it to you. If the stock then rises more than the market average, you successfully screwed the previous owners of the hated company. That's exactly like justice, only better because you made a profit. Then you can sell your stocks for a gain and donate all of your earnings to good causes, such as education for your own kids.

Having absorbed all of the wisdom I have presented here so far, you are naturally wondering if I have any additional investment tips. Yes, and I will put my tips in the form of a true story. Recently I bought something called an iPhone. It drops calls so often that I no longer use it for audio conversations. It's too frustrating. And unlike my old BlackBerry days, I don't send e-mail on the iPhone because the on-screen keyboard is, as far as I can tell, an elaborate practical joke. I am, however, willing to respond to incoming text messages a long as they are in the form of yes-no questions and my answer are in the affirmative. In those cases I can simply type "k," the shorthand for OK, and I have trained my friends and family to accept L, J, O, or comma as meaning the same thing.

The other day I was in the Apple Store, asking how to repair a defective Apple laptop, and decided, irrationally, that I needed to have Apple's new iPad. The smiling Apple employee said she would be willing to put me on a list so I could wait an indefinite amount of time to maybe someday have one. I instinctively put my wallet on my nose and started barking like a seal, thinking it might reduce the wait time, but they're so used to seeing that maneuver that it didn't help.

My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs's black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I'll probably buy some shares.

34 Comments – Post Your Own

#1) On June 07, 2010 at 1:15 PM, obsoleteaccount (22.56) wrote:

You = the man. +1 rec

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#2) On June 07, 2010 at 1:34 PM, USNHR (32.73) wrote:

That was good for a laugh... only because it is so true.

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#3) On June 07, 2010 at 1:42 PM, leohaas (33.21) wrote:

Hilarious!

But then, I am a biased Dilbert fan...

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#4) On June 07, 2010 at 2:06 PM, Griffin416 (99.98) wrote:

Absolutely love this post, +1 rec.

Back in the oil spike days 2 years ago, Cramer says if you are pissed off at the oil companies charging you sky high prices, purchase their stock to benefit from the nonsense. Ijust purchased an Ipod, I took it home, then I could not download my songs...guess why...I had to pay AAPL $5 to get some stupid software upgrade, uurgh. That day I bought AAPL at 200, sold it at 235 2 weeks later. (I could not justify not taking profits that I made so quickly)

Companies that are hated, yet always make money. MO, PM, GS, AAPL, Big Oil (XOM, BP). I probably could add, T or VZ and the cable providers (CMCSA, TWX)

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#5) On June 07, 2010 at 2:20 PM, allstarvulture (< 20) wrote:

I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers.

That may be the greatest single line I have ever read in a blog.

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#6) On June 07, 2010 at 2:27 PM, goalie37 (91.85) wrote:

Awesome.

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#7) On June 07, 2010 at 2:34 PM, obsoleteaccount (22.56) wrote:

and I have trained my friends and family to accept L, J, O, or comma as meaning the same thing.

 

THAT is the best line in a blog ever. that and "its like justice, but better because you make a profit"

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#8) On June 07, 2010 at 2:35 PM, johnnyrocku (99.56) wrote:

Just an awesome blog, BB.  Thanks!

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#9) On June 07, 2010 at 2:50 PM, ocsurf (< 20) wrote:

Nice work Bravo!

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#10) On June 07, 2010 at 3:03 PM, FreeMarkets (95.37) wrote:

It's why I always BET against the Seahawks.  If they lose, I WIN!  And if they WIN, then I'm happy because I'd pay $50 every game if that made them a winner.  Long term, I'm WAY UP financially betting against my team.  Hope to break even this year!

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#11) On June 07, 2010 at 3:06 PM, cbwang888 (25.97) wrote:

Top fool has spoken. Gotta spare some time to read ... :)

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#12) On June 07, 2010 at 3:24 PM, USNHR (32.73) wrote:

It's why I always BET against the Seahawks.

 Maybe they should allow professional athletes and coaches to gamble on the sports they are in for this reason?

 On second thought... no need to make more crooks and thieves, we have enough in D.C.

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#13) On June 07, 2010 at 4:39 PM, anticitrade (99.66) wrote:

While I agree that the line:

 "I have trained my friends and family to accept L, J, O, or comma as meaning the same thing"

is brilliant, I prefer:

"Can you justify owning stock in companies that are treating the Earth like a prison pillow with a crayon face? Of course you can"

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#14) On June 07, 2010 at 5:28 PM, kdakota630 (29.66) wrote:

That was awesome.

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#15) On June 07, 2010 at 5:38 PM, jonpunski (< 20) wrote:

great

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#16) On June 07, 2010 at 6:15 PM, ElCid16 (95.26) wrote:

Be sure to add Ticketmaster to your watch list...

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#17) On June 08, 2010 at 12:40 AM, walt373 (99.79) wrote:

The problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance. 2) You need to consider a company's track record.  Right, yes, those are opposites. And it's pretty much all that anyone knows about investing. An investment professional can argue for any sort of investment decision by selectively ignoring either point 1 or 2.

So true hahaha...

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#18) On June 08, 2010 at 3:09 AM, djshagggyd (73.86) wrote:

Great post, thanks for writing!

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#19) On June 08, 2010 at 11:06 AM, 4everlost (29.48) wrote:

I'm chuckling too much to come up with a clever comment.  Thanks for sharing the article!

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#20) On June 09, 2010 at 12:42 PM, colddrink73 (98.03) wrote:

This was a very well written post loved the humor and the wit. I also wish I had waited another week to pick up BP $real money play, but I'm hoping the dividend will help out and I'm thinking of doubling down next week.... got to wait for some spare cash. btw have any thoughts on the company that closed down Sugerland. Imperial Sugar?

greg

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#21) On June 09, 2010 at 7:27 PM, BigFatBEAR (29.27) wrote:

One of the funniest things I've read in a long while!

Thanks!

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#22) On June 12, 2010 at 8:45 AM, fewl10 (< 20) wrote:

What a bunch of complete a$$holes.  Of course there's no moral element to owning stock.  It's all about money.

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#23) On June 12, 2010 at 2:53 PM, BravoBevo (99.97) wrote:

Talk about slick ... has anyone else noticed that BP bought the terms "oil spill," volunteer" and "claims" on the Google and Yahoo! search engines

Now when a user types any of these terms into one of these search engines, a “sponsored link” to BP’s official page appears as the preferred choice on top of the page, reports CNET. 
"What it effectively does is that it bumps down other legitimate news and opinion pieces that are addressing the spill," but BP denies that this action is an attempt to draw away hits from other sites.

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#24) On June 12, 2010 at 3:48 PM, Starfirenv (< 20) wrote:

" Can you justify owning stock in companies that are treating the Earth like a prison pillow with a crayon face? Of course you can" = Priceless. +1 for that. However-
  If you really wanted to invest in that which you hate most, why don't you fund a couple abortion clinics. They make lots of money. Sorry, can't buy into notion of "screw morality, it's money I love".

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#25) On June 14, 2010 at 6:07 PM, yosemitebean (22.71) wrote:

I am speechless, and in awe.

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#26) On June 16, 2010 at 12:07 AM, HomieDontMess (< 20) wrote:

Apparently BP has its own navy, a small air force, and enough money to build floating cities on the sea, most of which are still upright. If there's oil on the moon, BP will be the first to send a hose into space and suck on the moon until it's the size of a grapefruit.

 

Sir, I am new to this site and I see you are our leader. I am a young recruit who has answered the call. I bought BP last week, put most of my extra earnings from last year into it actually, and spend most of my time when I am not working researching to make sure my investment is safe. I feel really good about it, but it is always nice to see other people, especially those who merit respect, agreeing with me. Thanks for sharing the valuable information. I plan on following your blogs to learn more.

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#27) On June 16, 2010 at 6:17 PM, Bays (30.45) wrote:

Bravo,

I disagree with your red thumb on Capstone!  As does Russian billionaire, Vlad Iiorich, who just bought 6 million shares!

I am still curious as to why you red thumbed them tho?

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#28) On June 17, 2010 at 5:27 PM, drinkmorebeer96 (61.09) wrote:

This made me laugh!

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#29) On June 18, 2010 at 11:02 AM, caterpillar10 wrote:

nice job - i too buy well on hate, just never thought of it that way....ESRX,WLP,WMT,DUK,SSL for just a few i can think of off hand....MONEY MAKING SLUTS!!!!!!!!

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#30) On June 24, 2010 at 1:53 PM, nzsvz9 (< 20) wrote:

BravoBevo,

Nicely packacged, and funny - but you know that. Like MoneyMcBags without the crude humor. Sorry for the comparison ... but I'm reading more and more lately for some place to put my money before everything alstry predicts comes true. After that I can Weimar my money around in wheelbarrows for a loaf of bread.

Problem is I've been teriible at picking stocks - only NEM worked for me this last year, so I'm looking to learn. After reading your blog here I find I hated some companies and they went bankrupt. Perhaps I should only invest in the ones for which I have a strong dislike instead. Thoughts?

Known as "make dislike not hate" nzsvz9

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#31) On June 29, 2010 at 1:24 PM, actuary99 (93.20) wrote:

Bravo,

It appears I am the only one commenting who actually read what you wrote (at least the part where you attributed the blog to Scott Adams, who wrote it).

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#32) On October 15, 2010 at 5:23 PM, AllStarPortfolio (27.53) wrote:

Bravo, do you have a quick pitch for XNPT for AllStarPortfolio?

I know you're busy, but if you could post one to the ASP blog i would post it immediately. thanks

-solaris

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#33) On May 25, 2011 at 2:24 PM, BravoBevo (99.97) wrote:

See David Smith's article titled Will BP Ever Get Everything Right?. He summarizes that "BP is the Inspector Clouseau of Big Oil -- possessing an amazing ability to execute one pratfall after another. Without that ability, the company is cheap. But the tendency can't be ignored ..." 

BP has good assets and decent employees, but the institution as a whole seems to try to operate like a national oil company, rather than a 21st-century publicly-traded free market enterprise. 

National oil companies (usually existing in closed-market countries) historically tend to operate as government or quasi-government entities (with little regard to the media or public sentiment). Commonly, the mindset is to pinch every nickel and dime with the mindset of fixing something after it breaks.

Free market enterprises, by contrast, are mindful of media and public sentiment -- especially in North America, where major businesses are used to taking proactive measures to avoid catastrophic (and embarrassing) disasters, even if the abundance of caution requires wearing both belts and suspenders.

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#34) On May 31, 2011 at 6:02 AM, SilverSwift (< 20) wrote:

ahhh so true I'm an Apple hater too, and even more so when I first saw iTunes/iPod etc. back in 2005/6.

Unfortunately this meant when I bought my first stocks in 2009 AAPL was half the price it is now, and *almost* a candidate to be shorted in my mind.

I'm still not buying Apple, but I do think you're onto something here

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