It's safe to say that BP may be public enemy number one in America right now. The oil leak seems to be neverending. Obama met with Tony Hayward & Co. today — face-to-face — to see what can be done to stop the disaster in the Gulf. Not to mention, there are countless boycotts of the company's gas stations. So, I guess it's also safe to say that if anyone offered most people BP stock, they'd "politely" decline.
But Scott Adams, the creator of the comic strip Dilbert, has a "theory that you should invest in the companies that you hate the most." He hates BP just as much as the next person. But in an essay in Wall Street Journal, he compares his method to the other ways you'd use to figure out where to invest your hard-earned cash:
Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.
Investing in Well-Managed Comapnies
When companies make money, we assume they are well-managed. That perception is reinforced by the CEOs of those companies who are happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish.
People Love Berkshire Hathaway And That Has Done Great
I'm not saying that the companies you love are automatically bad investments. I'm saying that investing in companies you love is riskier than investing in companies you hate.
Second, take a look at Berkshire Hathaway's holdings. It's a rogue's gallery of junk food purveyors, banks, insurance companies and yes, Goldman Sachs and Moody's. The second largest holding of Berkshire Hathaway is…wait for it…Wells Fargo.
(Disclosure: I own stock in Berkshire Hathaway for the very reasons I'm describing. And my first job out of college was at Crocker National Bank, later swallowed by Wells Fargo.)
As humorous as Adams' suggestions are, think about the companies that many people say they loathe everyday, yet continue to do business with: WalMart, Toyota, Apple (!) Even after Tuesday's iPhone 4 pre-order debacle, would you fork over cash for Apple stock?