It's axiomatic in investing that a cheery consensus comes with a hefty price tag. Just because something is axiomatic doesn't necessarily mean that it's 100% true, but let's just say that axioms don't become that way for want of reinforcement. So while I don't recall a rending of garments and gnashing of teeth over the prospects for Starbucks
Even companies that are obviously garbage have share prices. That means someone is out there buying it, while someone else is selling it. Sometimes I see trades going across the tape and think, "Who in the world is buying this?" With certain companies, you have to wonder what both the buyer and the seller were thinking.
Fortunately, you don't have to wonder too much. Whenever a purchase is made, the buyer is essentially saying, "There is no better place in the world for my money than right here," while the seller is coming to the exact opposite conclusion. This is what makes a market.
Here's an aside that I'd like to flesh out at some point: Have you ever noticed that the talking heads on television and print never, ever, ever ask guest money managers what they're selling right now? They always ask, "So, what are you buying?" The opposite question never gets asked. Man, I'd watch that show in a second.
The worst of times, the right times
It's pretty easy to determine which companies are the best. Krispy Kreme
But what about the unloved -- the companies that you hate? Investing in them takes some skill, and some discipline. Any company that isn't on its way to bankruptcy (thus usually causing its equity to be cancelled) is a buy at some price. Just as it's easy to name the companies that are doing the best, it's also easy to reel off the names of firms that the entire investing community just seems to hate. Yet, time and time again we've seen firms that have had maximum bad press turn out at that moment to be pretty good investments. Of course, sometimes it's darkest right before you fade to pitch black (read Enron, WorldCom, etc.). But not always.
I'll give you an example. This past year American Airlines'
Yet those who bought in at that point have made enormous gains. I thought then as I think now that this company's management (some of whom left after the scandal) and, more importantly, its board didn't and doesn't deserve being entrusted with your shareholder dollar. But 1,000% gains mean those who took the view of buying what's hated at the time have been more than compensated for the risk of putting money in a flailing company with an unresponsive board competing in a sick industry.
The bad and the ugly
So, who are some of "the hateds" that might be good buys?
Martha Stewart Living Omnimedia
3. Marsh & McLennan
There are plenty of other companies that are despised. And yet, watch such market luminaries as Bill Miller at Legg Mason Value continue to snap up shares in "obvious losers" like Kodak
Bill Mann, TMFOtter on the Fool Discussion Boards