Do your due diligence before you buy a stock. Keep up with your holdings regularly. You've heard it all before, right? There are several key factors to consider when evaluating a company, including its fiscal health, its competitive position, its growth prospects, and its latest news and announcements. But there's one more important element that many investors overlook: The scuttlebutt about what's wrong with your company of choice.
Scuttlewhat?
Word-of-mouth information can be an investor's best friend -- even if the buzz is bad. In 2004, Whitney Tilson wrote about "The Scuttlebutt Advantage," arguing that gathering information by nontraditional means can help you "gain proprietary insights about a company -- the type of insights that, on occasion, can lead to big profits." Websites set up specifically to criticize a company can be great sources of scuttlebutt, offering convenient ways to hear little-noticed criticism of popular firms.
Always the low opinion
You shouldn't be surprised to learn that Wal-Mart (NYSE:WMT) is slammed all over the Web, on sites such as Walmart-Blows.com, WakeupWalmart.com and Walmartwatch.com. To defend itself, the company set up Walmartfacts.com, offering its own positive spin on itself. Such divergent perspectives can be especially illuminating, since the truth often lies somewhere between extremes of positive and negative opinion. (Critical sites may also help you find evidence that a firm is changing its ways, as when treehugger.com announced that "It's getting harder to hate Wal-Mart.")
Wal-Mart's an easy target, but you may be more surprised to learn that Enterprise Rent-a-Car, the privately held king of car rentals, has its detractors, too. Visit FailingEnterprise.com to learn why one disgruntled customer believes that the company doesn't honor reservations and overcharges for some services. Sites like these shouldn't dictate your opinions, but they can help to inform them.
More hate
A quick sample of corporate "hate" sites:
- At paypalsucks.com, eBay's (NASDAQ:EBAY) PayPal service gets lots of slams and complaints about its policies and practices.
- The online bane of UPS's (NYSE:UPS) existence may be UnitedPackageSmashers.com, although it also features pro-company comments.
- Best Buy (NYSE:BBY) is criticized at BestBuySux.org, which includes anti-company comments from employees and customers, as well as pro-company posts.
- Allstate (NYSE:ALL) gets skewered at allstateinsurancesucks.com.
If you crave more information on companies in which you've invested, or perhaps if you're just looking for some entertainment or enhancement of your corporate knowledge, look up hate sites related to your companies. Sometimes, you can simply add "sucks.com" to the company's name. Or try entering "I hate [company name]" into your search engine of choice.
Come investment time ...
When it's time to make an investment decision, don't dismiss a company just because it has some dissatisfied customers. Just about every company does. (Even Mother Teresa has her critics, after all!) But you should take negative information into consideration, and perhaps do some follow-up digging, too. For example, consider studying your local Allstate or Best Buy location, questioning its employees and customers about their experiences.
If you're looking for companies without huge bases of haters, consider some of the smaller firms recommended by Tom Gardner and Bill Mann in our Motley Fool Hidden Gems newsletter. While small and growing companies often have sizable fan clubs, most haven't yet grown big enough to attract much disdain. Small companies also have a lot more room left to grow. On average, our Hidden Gems picks have more than doubled the market's returns -- try the service for free to review every single recommendation to date.
