One Stock's Warning Sign for Investorshttp://www.fool.com/investing/general/2012/11/01/one-stocks-warning-sign-for-investors.aspx Tim Hanson, Motley Fool Asset Management
November 1, 2012
The following commentary was originally posted on FoolFunds.com, the website of Motley Fool Asset Management, LLC, on Oct. 8. With permission, we're reproducing it here in an edited form.
Focus. It's one reason certain companies succeed beyond all expectations and others limp along, misallocating shareholder capital. After all, no one is good at everything, so in order to achieve above-average success, a company must determine where it has an advantage and then use that advantage relentlessly.
On the flip side, there are individuals and organizations that don't do much well, and therefore flail about trying to do everything. This is a warning sign for investors given the risk such a strategy runs -- at best, misallocation; at worst, the permanent loss of shareholder capital.
Focus on focused firms
On the other hand, a restaurant stock that we sold not too long ago, Singapore's Breadtalk Group, has outperformed. But here's why we're happy with what we have: The aforementioned pressures on Yum! Brands, Chipotle, and Arcos Dorados will ultimately abate and their focus on opening and operating popular, profitable restaurants around the world will help them come through stronger on the other side.
Breadtalk, on the other hand, is rising likely because investors think it looks cheap, but management is showing itself to be dangerously unfocused -- the reason we sold it from our portfolio in the first place.
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