I hate Starbucks (Nasdaq: SBUX ) .
I admit that I felt a little jolt of smug pleasure when I heard that the company was closing 600 stores. Starbucks’ brewed coffee is too bitter and too expensive, its computer-controlled lattes are mediocre, and the whole attitude of the stores makes me roll my eyes.
These are a few of my un-favorite things
The coffee king isn’t alone in receiving my disdain, though. Here are some more companies that make my hate list:
- Toyota (NYSE: TM ) . I think too many of their vehicles are designed for people who hate cars -- and I love cars. And how can they be our green transportation saviors while offering all those huge V-8-powered pickup trucks and SUVs?
- PepsiCo (NYSE: PEP ) . I took the Pepsi Challenge when I was a kid -- and chose Coke three times out of three. And given what I know now about food and health, how can I like a company that is all about selling water mixed with corn syrup?
- Adobe (Nasdaq: ADBE ) -- or at least Acrobat, which gives my computer fits for some reason I don't understand. I curse this company every time I reboot. Lately, that's a lot.
- Microsoft (Nasdaq: MSFT ) -- simply because it’s Microsoft. (This article is being written on a Windows PC, but I've owned Apple (Nasdaq: AAPL ) stock since 1983, and I remain a big Steve Jobs fan. I probably don't need to say any more than that.)
You know what else I hate? If I bought those five stocks right now, I'd have a pretty nice large-cap portfolio, one that could serve as a cornerstone of my retirement portfolio for the next several years.
Stocks you hate can make you money
I actually did buy Starbucks stock for my IRA recently, after months of thinking about it and waiting for a good entry point. (I paid $14.97. Yes, it went lower, and may go lower again. But I think it was low enough for a stock I'll probably hold for a few years.)
I mentioned this trade to a couple of close friends, and they were both shocked. "You hate Starbucks!" one said. "How could you stand to buy their stock?"
Simple, I told her. I may not be a fan of their product, but lots of other people are. It's a well-run business, going through what looks to me like a temporary slump.
The stock might be fairly priced given near-term earnings estimates, or even a little overpriced, but I think it's cheap when you look at the company's longer-term prospects. It's still an iconic global brand with nice margins and no near-term danger of being overtaken by competitors (though I admit that Peet's (Nasdaq: PEET ) expansion plans are worth watching).
Maybe time will prove me right, maybe not. But either way, I tried hard to look at it objectively.
That objectivity is a key to successful investing. Studies have shown that people tend to seek out and focus on information that confirms their preexisting beliefs. That tendency is called confirmation bias, and it can make a mess of your portfolio.
Investors, particularly new investors, who can keep an eye on their enthusiasms are more likely to notice and focus on information that others are missing -- and sometimes that will lead to well-timed buys (or sales) ahead of the herd. "Ahead of the herd" is another way of saying beating the market.
Retire well on other people's biases
I also think it's possible that Starbucks stock got cheap because other Starbucks haters were quick to trash the company once things got a little rocky. Lots of people roll their eyes at the $4 lattes and other parts of the Starbucks phenomenon.
Some of those people are stock analysts, and while plenty have made reasonable cases for their positions, there are a few where you can almost feel the wild-eyed glee. Think those are purely objective arguments?
We all know by now that bear markets are an excellent time to look for value stocks, and that value stocks are a key component of a well-structured retirement portfolio. As you sift through beaten-down stocks looking for the real values, think about confirmation bias, and how that might have affected others' decisions to sell. You may find a lot to love about some of the stocks other people love to hate.