Stocking Up

Posted on January 13, 2006 3 Comments

I’d like to preface this post with a word of caution. Any good writing teacher will advise you to “write what you know.” In other words, me writing a novel about child-rearing probably wouldn’t be great to read. Likewise, a blog called “The Budgeting Babe” written by a shopaphobic male probably wouldn’t be widely accepted (unless he was a closet drag queen playing a Budgeting Babe, in which case, scandalicious!).

That being said, I will tell you now: I know NOTHING about stocks or investments of the sort. For those of you on my level, here’s a summary of how the Stock Market works from Young Money.

Despite the above disclaimer, I did find this tidbit from The Motley Fool really, really interesting:

“Unexpected powerhouses

At MSN.com recently, Jon Markman listed the top-performing stocks of the past six years (roughly the same period of the Fortune list). He noted: “The leading stock over the past six years, according to my calculations, makes just about the least exotic product you can imagine: soda pop. It’s Hansen Natural, which is up 3,739% since Jan. 1, 2000. The next four best aren’t exactly household names, either. They are: KCS Energy, a Houston-based natural gas producer, +3,251%; IRIS International, maker of automated urinalysis systems, +3,248%; Amedisys, a home nursing-care provider, +3,181%; and Quicksilver Resources, a Texas-based natural gas producer, +2,929%.”

Can you believe that? (Thanks to Brian for the call.) All this fuss I’ve been hearing about Google and Apple, yet the top stock of the last 5 years is soda! A professor once told me in college that the only real way to invest is to chose companies you believe in, with products you actually like. He spoke of some famous rich guy who only bought things like Coke and Disney. My great aunt, who I never really knew, except that she was apparently very stylish in her heyday and traveled to places where she slept in tree huts and rode on elephants, used to have the same philosophy about investing.

I’m not advising that you go out and immediately buy stocks in Gucci (GUCG.PK) just because you lo-ove your Gucci sunglasses. But if you love you some Hansen cherry vanilla fizzy, maybe you should look up information on the company in your spare time. You may find good stuff. Here’s what the Motley Fool went on to say:

“How would you have found gems like these? You probably wouldn’t be aware of most of them, unless you worked in the natural gas industry, or in health care. But if you drink tasty carbonated beverages, you would have had a chance of spotting one of them. And if you had been curious enough, you’d have paid attention to see how many people were reaching for Hansen drinks over other options, and you’d have looked up the company’s financial reports. Just noticing a newly popular company isn’t enough — you need to assess many factors. Revenues might be surging, but if the firm isn’t turning them into rising profits, that’s not good enough. A growing cash pile is good, but how does it compare to the firm’s debt level? You get the idea. (Rex Moore introduced Fool readers to Hansen more than a year ago.)”

For those of you who want a more traditional way of finding those “hidden gems” that you might be wearing, eating, drinking or otherwise loving, here’s another Motley Fool tip:

“Another way to discover hidden gems is, ironically enough, through financial publications. Yes, I know that this article isn’t painting a pretty picture of “top stocks” lists. But actually, TickerSense looked at some other periodicals’ best 10 ideas for the current decade, too. Fortune’s list was the least impressive, but other lists, from the likes of Forbes, for example, did beat the S&P 500. (And Fortune has offered plenty of more productive lists in the past.) You just shouldn’t buy blindly based on any list. If you’re going to look at a list of stock picks, take some time to research the companies further. Smaller companies can be great performers, as they have so much room to grow. If you’d like a bunch of recommendations from us, try our Motley Fool Hidden Gems newsletter for free — some of its recommendations have doubled and tripled in value in just a year or two, or less. “

See? No need to feel intimidated by the process – although I still do for some reason. But maybe if we keep reading articles like these and repeating to ourselves that “investing is not scary,” we’ll know enough to feel more comfortable!

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