Post of the Day
December 7, 1998
Rule Breaker Port Folder
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Subject: Do the Analysis
I've seen a lot of posts on this board to the effect of: "Do you think XXX Co. is a rule breaker
stock" or "XXX Co. is a market leader and a rule breaker stock, what do you think" without any
analysis whatsoever. To me this is the antithesis of what the Motley Fool is all about.
One of the main goals of the Motley Fool is to educate ourselves about stocks so that we can make our own investment decisions without relying on the faulty advice and guidance of the "Wise" or anyone else. However, by coming in and asking for opinions on a stock without doing your homework on it is basically letting others influence your stock decision, much like the "Wise" stockbroker calling to sell you a stock over dinner, or the "Wise" analysts on CNBC telling you which stocks are "long-term accumulate" and "short-term strong buy".
At a minimum, if you want to discuss a stock as a rule breaker, you should look to see if it meets the rule breaker company criteria before proposing it:
1. The top dog and first-mover in an important, emerging industry...
2. Sustainable advantage gained through business momentum, patents, visionary leadership, and/or inept competition...
3. Excellent past share appreciation, measured by a relative strength of 90 or higher...
4. Good management and smart backing...
5. The greater the consumer brand, the better...
6. A significant constituent of the financial media is recently on record for calling it overvalued...
And once you post about the company, you should be able to answer any of the six questions about it. Otherwise, why should we listen, and why should we analyze it and discuss it for you, especially if you haven't bothered to do any research on it yourself?
I don't mean to be overly harsh to anyone who is new to the board, and if you have any questions about the criteria, post your question to the board and I or someone else will be happy to answer it. Or post what you do know about the company, for example, what industry it's in, why the company is a leader, the challenges of competitors, etc. It's just that when people post a stock as a rule breaker and ask an opinion on it without doing any research, I fear that the message of the Motley Fool, "educate, amuse, enrich," has been lost. If you're not willing to do your own research investing your own money, you're better off in an S&P Index 500 fund.
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