The Wine Cellar (Fribble) July 21, 2000

Fribble The Wine Cellar

By Karen Kosoy (TMF
July 21, 2000

There is something to be said about opening a bottle of fine wine and savoring the aroma. You slowly pour, observe the color, swizzle the liquid in your wine glass, then drink. Only then do you reap the reward of a long-term process.

Successful investing reminds me of winemaking. A company begins as an idea, a hope, and a dream. Management is like the vintner who blends an assortment of rich and complex flavors. They assemble teams of people who can lead the company to the next level. They oversee operations and ensure that the company stays on track to reach its goals. For public companies, management has the even greater task of meeting investor expectations, and — for the Dom Perignon of companies — of exceeding them, year after year.

Just as the vintner has to inspect grapes to find ones that are right for a specific wine, so must the investor looking for a long-term investment (although the criteria used by an investor are much different). For investors, learning these criteria may be difficult at first. Should the company have a high P/E ratio? Should it make a product you use? What if the company doesn't yet make a profit? (Note: The Motley Fool has articles about all of these subjects. Links are provided below.)

Not every investment will be pleasing to the palate. There will be bad years, just as wines have years that are not so good. There will be out and out lousy investments — same as selecting a disappointing bottle of wine. The point is, one should continue to use his/her experience to eventually collect a "wine cellar" full of vintage investments. The day will come when the investing skills acquired over the years will reward you immensely.


Related Links:
The Price Earnings Ratio, Foolish Four Portfolio, 02/16/99
"Buy What You Know" Is Too Simple, Drip Portfolio, 07/14/00
Valuation Metrics for Unprofitable Companies, Fool on the Hill, 2/16/00