When's the last time you had the hots for a stock? Across a smoky room, brimming with inconsequential ticker symbols, one particular equity off in the distance catches your eye. You're intrigued. You're smitten. If you're not careful, you're toast.
Granted, few of you out there would compare due diligence with the traditional courting process. The line is thick and wide between wealth creation and procreation. Yet when you think about it, isn't Wall Street a lot like the quintessential meat market?
Aren't the same traits that you see singled out in personal classifieds the same things you'd want in your next investment? Honest. Smoker (or non-smoker, for the value investors out there). Not a downer. Willing to commit.
So let's tweak five of the cheesiest pickup lines for our analytical merriment. You won't believe the amazing companies you can hook up with if you know the right questions to break the ice.
What's a stock like you doing in a place like this?
In the latest issue of our Motley Fool Rule Breakers newsletter service, one of our recommendations comes from an industry so characteristically sleepy that one would expect the sector to inspire more yawns than stock ideas. However, we spotted a young company that is revolutionizing the market. It's not a matter of taking the road less traveled. It's a matter of taking the more popular path but taking the time to unearth the soil beneath the tread marks to find what others have missed.
Let's go back a few years to when Starbucks (NASDAQ:SBUX) was just starting out. Could anyone have figured that coffee was an untapped colossal niche? It was the morning beverage that went for pocket change at fast-food chains or your neighborhood coffeehouse. How many figured that a Euro-themed retailer would be able to charge many times more for a premium blend and grow its empire to more than 9,000 locations worldwide?
Trust me, when you're looking under rocks that most growth stock investors wouldn't bother to turn over, you will often surprise yourself with your early discoveries. JetBlue (NASDAQ:JBLU) may have fallen out of favor since peaking two years ago, but it is another good example of finding a diamond in the rough.
If I told you that you had a beautiful balance sheet, would you hold it against me?
I can be a sucker for beautiful balance sheets -- the greener, the better. While I can accept debt and the merit of leverage, some of the easiest investing decisions come when you find a company so out of favor that it's trading for little more than its net net working capital.
As long as the company isn't burning through its cash -- and that's important -- you may find an investment with somewhat limited downside as it strives to works its way back into the market's fancy. Three years ago, I gushed about Apple Computer (NASDAQ:AAPL) when it was trading for just a little more than the cash on its balance sheet. At the time, the stock was trading for a split-adjusted $7.35 a share.
"As a matter of fact, unless I snoozed one too many times through history class, every time Apple has traded near its greenbacks level, it has eventually come back to rally another day," I wrote at the time. "Sooner or later, the investing masses rediscover Apple's edge."
I didn't nail the reason for the stock's eventual resurgence. I did mention the iPod's move toward compatibility beyond Macs as a positive step, but I did so only in passing. It was the historical cheapness of the stock that tempted me. Luck can go a long way when it's got a green safety net beneath it.
What's your major?
The corniest query down fraternity row will win you major points when it comes to scoring with your investing. Why? Because way too often, folks buy into a stock without realizing what its major profit driver is. Though it may seem obvious, there are still people who buy into a stock like Berkshire Hathaway (NYSE:BRKa) without realizing that its biggest contributor is insurance. How many people underestimate the role of financial services firms on companies such as General Motors and General Electric? Way too many.
So get to know the companies you are buying. If you wouldn't plunk down $8 for a movie ticket before asking your friends about it or reading a few critical reviews, why spend many times that box office ransom on a stock before knowing as much as you possible about the company?
Is that a catalyst in your plans, or are you just happy to see me?
Great companies aren't great by accident. Because the market is often efficient in pricing a company based on its past performance and some semblance of what tomorrow will bring, the forward-thinking investor is left with the juicy task of figuring out which companies have catalysts for growth that the market isn't fully considering.
Sometimes it's obvious. Just look at Pixar (NASDAQ:PIXR), a company that has spent the past decade creating computer-rendered gold, yet has been partaking in only half of the profits. That all changes after next year, when the company's bottom line stands to double -- at least -- if its upcoming films fare as well as its earlier creations.
Sometimes it's not so obvious. Some of our Rule Breakers newsletter recommendations -- and you're welcome to take a 30-day trial on us if you want to check it out -- have great stories to tell. Steiner Leisure (NASDAQ:STNR) has been up by more than 40% since being singled out six months ago. With its prolific chain of onboard spas, it is servicing the most lucrative slice of the booming cruising industry. Whether it is rattling the supply chain or revolutionizing a moribund industry, Steiner has that special spark to take it to the next level.
So, what haven't you been told tonight?
This last desperate straw of a pickup line can be brutally efficient in investing circles. That's because the investor that asks the questions no one else is asking will come away with better information.
TiVo (NASDAQ:TIVO) was in a bind. The satellite giant that accounted for most of its subscribers announced that it was considering a rival's digital video recorder. The stock got trounced. The market didn't seem to notice that TiVo's margins were lousy on the hardware side anyway, or that TiVo's patent-rich portfolio positioned it well to thrive on the software licensing side. It has done just that, striking deals worldwide and even emerging as a potential force in the media advertising market. While the stock market has drifted since the stock bottomed out in early February, TiVo's shares have risen by roughly 75%.
So, are you building up the nerve to hit on your next potential equity conquest? It's easier than you think. Besides, what's the worst that can happen? If it doesn't pan out, you move on. What if things go well? Well, when's the last time that you bought a stock breakfast?
For more Foolishness:
- Check out some of the latest Rule Breakers stock recommendations (a free trial is required).
- And see my original gushing over Apple Computer.
Longtime Fool contributor Rick Munarriz thinks you should never see a stock through beer goggles. He does own shares in Pixar. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
