Wealth Management & Financial Planning

Wealth Management & Financial Planning

What Have Your Investments Done for You Lately?

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When we started the Financial Enhancement Group in 1997, the most commonly held individual stock was GM. The second was undoubtedly GE. In referring to their GE investments, people often said, “Joe, don't you dare sell my GE stock; but give me the opportunity to run over Jack Welch and back up and I will.” GE Chairman and CEO Jack Welch was adored by Wall Street but not so loved by those who worked for him.

Welch turned over the keys to the GE kingdom in 2001 and Jeff Immelt took the helm as CEO. While many factors may have contributed to Immelt’s ousting this week, we know one thing for certain: GE’s stock went nowhere good for 16 years. The company underperformed compared to both the general market and to peers.  

How does leadership influence a company’s value? Does the respect and admiration of employees or the love of Wall Street matter most? Our argument is that if a company has the full support of workers, its stock price will eventually reflect the value and vision of leadership. Undoubtedly, the captain of the ship contributes to culture and performance.

For investors, the takeaway from the GE fiasco is this: You cannot own a stock because of what it did for you two decades ago. While a leadership change doesn’t necessarily mean investors should buy or sell a stock, a transition at the top should certainly be on investors’ radar. Wall Street wanted GE to make a change and focus the direction. After an extended period of time, GE’s board of directors made the change.

As you examine your portfolio, you need to know what you own and why you own it. When my wife Barb and I meet a new couple, they often ask how we met. When a family comes into my office with individual stocks or mutual funds, I ask similar questions. How did you “meet” or come to own this investment? Do you own it today for the same reason you bought it? What has changed economically, in your life or in the company’s business model? In short, what has it done for you lately?

There is no reason to constantly buy and sell investments in your portfolio. Constant turnover could be accompanied by added expense and possible taxation. However, your investment playbook should include companies that are relevant in today’s environment. People often tell me they own a fund or a stock based on ratings, the opinions of others or the stock’s historical performance. All of those reasons may seem logical, but are the investments relevant today? 

For years, my radio listeners have heard me say that I married my wife but I only date my stocks. Some have become long term relationships but that relationship is based on today and where we expect the future is headed. The past is irrelevant.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column offset=”vc_hidden-lg vc_hidden-md vc_hidden-sm”][vc_widget_sidebar sidebar_id=”sidebar-main”][/vc_column][/vc_row]

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