- Make Money from “Sin” stocks and “Out of Favor Stocks”
- Know the difference of a failing company and an “out of favor” company.
Companies become out of favor all the time for a whole myriad of reasons. A classic example is that of tobacco companies. When the public learned of the health risks associated with tobacco and lawsuits were filed many investors quickly began dumping their shares of tobacco companies. Now I don’t want to get into an argument here on whether a company should exist or whether it should be allowed to sell products that may or may not be harmful, that would be another topic of discussion altogether. What I do want to touch on is strictly from an investor’s point of view.
So consider the Tobacco companies. While some investors panicked and sold their shares many investors continued to hold on and even added to their positions. These investors saw that the tobacco companies were not going to collapse and go under any time soon as they were in effect; cash machines and they were still going to be around for many years to come. Those that saw these companies as out of favor stocks made fortunes from their ability to see through the clutter.
A more recent example is that of coal companies. Last year many coal company stocks were trading at ridiculously low rates. Why? Because some investors felt that all coal companies were going under, that coal was bad for the environment and the political administration at that time had stated it was their goal to eliminate the use of coal. I knew immediately these were simply out of favor companies. I am by no means against Solar and Wind generation of our power needs but looking at it from a practical standpoint I knew coal was not going away in my lifetime. The world has too many coal plants in use and you just cannot snap your fingers and replace these plants over night. So, I started buying coal companies at really cheap prices and great yields on their dividends. It paid off, my returns have been astronomical and I expect them to keep generating huge returns for me into the future.
The Social Agenda Stocks – Many Companies today are hated by various groups of people because of the products they produce. Different groups of people seem to have their own reasons why they should not own stocks in particular companies. Whether you or I agree with them is a whole other article. Now I know some will disagree with me on this one but the fact is, I do not care! I and others like me have made great money buying stocks that are out of favor due to the agendas of others. Some of these stocks are , Oil Companies, Coal Companies,Tobacco Companies, Prison Stocks, Alcohol Companies, Sugary Drink Companies and the list goes on and changes almost as quickly as the winds. Sorry folks, My agenda is providing for my family and if I can make more money off these stocks than others, so be it. My family comes first.
Now I know what many are thinking – It’s great that you did so well but that doesn’t do me any good. That opportunity is in the past. The fact is that these opportunities are presenting themselves all the time. You just have to keep looking for them. Keep track of political and social issues. This can give you clues as to where out of favor stock opportunities might be.
I like to look at “The Big Picture” when looking for out of favor stock opportunities. Take the BP (British Petroleum) Oil Rig Disaster in the Gulf. The media loves to jump on these events (I am in no way making light of the tragedy of the event) and to sensationalize the stories to attract more readers or viewers. This can blow an event way out of the reality. Or, another example is Carnival Cruise Lines when they had a series of events that made the news, a virus that made passengers ill, a ship that caught on fire and a string of events that got so much news coverage that investors panicked and started dumping their shares of stock. It just so happened that I took a cruise around that time frame, not only did a get a cheaper fare from it, I had a wonderful time and experience and I got to see first hand how much money they were rolling in from all the happy passengers. I knew this stock was not doomed and it would turn around. So while others were selling, I started buying the stock at discounted prices. In less than a year the stock recovered and I made a great deal of money from it. That is the vision you need to take advantage of “Out of Favor Stocks”.
Agree or Disagree with all or part of this article? – Feel free to post your thoughts and comments below – but keep it nice.