Investment Advice – buy what you know
Yes, we have all done it: bought stock in a company just because of positive news coverage or what someone has said, without really knowing about the strengths and weaknesses of same, or even what the company does or sells. This is one reason why TMF advice on stocks has always been kinda marginal to me: they always seem to feature a company I have never heard of in an industry I know little about. To emphasize this point, I present 3 cases where I do know about the company.
I have family in Hawaii, and kept up on their comments on HA. When it emerged from bankruptcy, I got positive reports, and bought. At the peak, this stock was a 6-bagger. In the current market, it is “only” a 2-bagger. Then came champagne day: both Aloha ( the main inter-island competitor) and ATA (small fry) disappeared from the Hawaiian market, and I got nothing but glowing reports on how HA handled the increased traffic. Currently, I am getting conversations that when the economy recovers and tourism resumes apace, HA will clean up.
Way too early in life, I had congestive heart failure, and was therefore intimately familiar with its intricacies. By coincidence, a couple weeks after finally being able to return to work, I read a rather lengthy article during lunch on a warm afternoon, on a new drug for same. Natrecor is a natural enzyme created by the human body as a reaction to heart failure, being manufactured by a small biotech firm called Scios. I researched the clinical trials, and found that they were kinda nugatory but nonetheless had positive effects and was being approved the FDA. Despite its weakness, knowing the coming wave of retiring boomers and consequent cardiac care, I was reasonably sure that it would become regularly prescribed, and stock therefore becoming something like a 10-bagger when Natrecore became a standard treatment. THEN: JNJ bought it out, not for Natrecor but because Scios also had a promising arthritis drug in the pipeline. Yeah, doubled my money, but D’OH: there goes one long-term investment.
FANCY COOKING GADGETS
I graduated from cooking school many moons ago. Before that, I worked much in various high-class cooking retailers. I learned that even when the economy heads south, people still bought $50 kitchen knives and $125 pots and pans regularly, seemingly unfazed by dark economic conditions. So, WSM is on the buy list. Sadly, I ran out of cash and could not buy it, but I did add it to my Fool portfolio.