Here's a central concept about the stock market that many people lose sight of: It's a market of both buyers and sellers. When someone buys a share of stock, it's because someone else sold it. When you're bullish on a company, someone else is bearish on it. So don't let yourself get overly swayed by any particular bullish or bearish case made about a stock.
No matter how obvious something may seem to you, you can always find someone who thinks the opposite. There are plenty of reasons why that may be the case. When you buy a stock, a seller may have bought shares at a much lower price and be looking to cash in. Or a seller may just need the money and not care about the price any longer. On the other hand, a seller may be focusing on negative information about the company, while you're more positive on its prospects.
See for yourself
You can see this phenomenon in action every day. Here, for example, are some stocks that most investors don't love, as they haven't recovered from their losses in the same way many stocks have. They have many detractors, yet they're still rated highly in our Motley Fool CAPS community, so it's clear that some investors still believe in them.
|
Company
|
CAPS Stars
(out of 5)
|
1-Year Return
|
|
Aflac (NYSE: AFL )
|
****
|
(30%)
|
|
ConocoPhillips (NYSE: COP )
|
*****
|
(36%)
|
|
General Electric (NYSE: GE )
|
****
|
(26%)
|
|
Monsanto (NYSE: MON )
|
****
|
(30%)
|
Data: Motley Fool CAPS, Yahoo! Finance.
Even the most-loved companies on CAPS have at least some high-rated All-Star members who think they'll underperform the market. Take a look:
|
Company
|
CAPS Stars
(out of 5)
|
All-Star Underperform Ratings
|
|
Johnson & Johnson (NYSE: JNJ )
|
*****
|
47
|
|
Procter & Gamble (NYSE: PG )
|
*****
|
19
|
|
Vale
|
*****
|
21
|
|
Activision Blizzard (Nasdaq: ATVI )
|
*****
|
26
|
Data: CAPS. Fool.com.
Yes, even Johnson & Johnson, with nearly 12,000 bullish supporters on CAPS, has its detractors. For instance, one member simply believed that while J&J is still a solid company, it won't keep pace with the S&P. Since that January call, the stock has indeed trailed the S&P's return. You can't get much more unanimous support than for Procter & Gamble, but it still has naysayers. Listen to what they say, but heed them at your own risk.
Always remember that there are two sides to every stock story, and it's your job to decide what you think, after gathering lots of information. Only by understanding both sides can you make a truly informed decision.
Stocks are jumping, but Alex Dumortier thinks putting your money in cash might be your best move now. Find out why here.
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