Good product => good company => good stock?
I have been thinking about it for a while, and I believe in lots of cases this formula is not necessarily true. I understand this is a difficult topic to discuss because the subjective nature of the “good product”, “good company” and “good stock”.
For example, Marlboro (thus Altria, the company) is good for smokers because it provides stimulate to them; but it’s bad for people who lost loved ones because of cigaretee related disease. By the way, Altria (NYSE:MO) is the No. 1 in terms of investment return among S&P500 companies in last 40 years, according to Wharton professor Jeremy Siegal.
Altria/Marlboro is an extreme case, because cigarette itself is controversial. How about Crocs? Its ugly shoes can be found from Brazil to Sweden, and people seems liked it. The company is expanding rapidly in past few years and is providing good jobs for 5,700 people worldwide as of Q3 2007. How about stock holders (a.k.a, people like yours truely)? Well, it was a fun ride this year until Oct. 31, when the company announce the Q3 results. Stock dropped almost by half in 7 trading days. No one is happy except the short sellers; and a very small group of people who had escalator accident while wearing Crocs.
And it looks like people (longs) will hate the stock for a while, because they lost money on this. But does that change the fundamental of the product or the company? They are the same products (if not more), and same management (now with the lesson learned from last 10 days).
But people (longs) are still going to hate the stock for a while. Until the stock price recover, if it even happens.
To be continued…