Not to Love and Not to Hate!

Never fall in love nor be hatred with a company’s stock. A stock is just a financial tool to help us achieve our investment goal, not our lover nor our enemy. People often make a mistake of sticking with a company’s stock for too long without periodically evaluating the underlying company’s fundamental strength, potential future stock price appreciation, and the economy condition. The infatuation is usually attributed to the fame of the company, satisfaction in the company’s products, past investment return with the company’s stock, or proud of being the company’s employee.

For instance, Citigroup was the biggest well known bank in the world before the financial crisis but it would have bankrupted if the government did not bail it out. Another example is Microsoft. Its products are omnipresent in every computer. Its stock made a lot of people a millionaire in 90s. Although the company still makes tons of money every year and it has billions dollars of cash equivalent securities in its account, its stock price has dropped more than 50% from 2000 to 2010. If I was a Microsoft investor, I would have been better off by selling the stock at the beginning of 2000 and put the proceeds into a bank saving account. The main problems of Microsoft were that the stock price was ahead of its fundamentals in 2000 and the company’s innovation was slowing down.

Conversely, hating a stock may make you miss a potential profit opportunity and it may be even worse if you are shorting it. Be neutral on a company’s stock; never love nor hate it. If you have a position in a stock, it is important to periodically evaluate the underlying company’s fundamental strength, potential future stock price appreciation, and the economy condition.