Innovators, Imitators and Idiots

When asked how the financial crisis happened, Warren Buffett once explained there are innovators, imitators and idiots.  He was talking about the natural progression of investments, and the herd mentality.  The innovators identify good investment opportunities, the imitators are a little late to the party but still follow in the innovators footsteps, and then the idiots pile on after the opportunity is already gone and end up creating and bursting the bubble.  We at Blue Harbinger understand this progression works in both directions, which is why we have a strong preference for contrarian investments.  It's always darkest before the dawn.  Buy low and sell high.

 
 

Continuing with the "innovators, imitators and idiots" theme, we have two updates this week on stocks we own (Procter & Gamble and American Express) and one update on a stock we don't own... this week's stock of the week... Tesla Motors (TSLA).

Regarding Procter & Gamble (PG), it's dividend yield is near a 25-year high (around 3.6%).  Procter & Gamble NEVER cuts its dividend (they'd rather layoff tens of thousands and sell off scores of businesses before they'll cut the dividend).  Some people interpret this high dividend yield as a warning sign.  They say the dividend yield (annual dividend payment divided by stock price) is high because the stock is underperforming and the company is in trouble.  Instead of agreeing with these "idiots," we take the contrarian stance that now is an excellent time to buy PG.  You can read our recent update on PG here, and you can read our full research report on PG here.

American Express (AXP) is another stock that presents an outstanding contrarian investment opportunity right now.  This stock has been beat up this year for two reasons.  First, it lost an exclusive relationship with Costco this year, and second it's being hampered by low interest rates.  However, AXP received some good new this week regarding a new relationship with membership retailer Sam's Club.  You can read our views on the new Sam's Club deal here.  Also, interest rates will eventually rise which will be a good thing for AXP.  You can read our full AXP research report here.

This week's "Stock of the Week" was Tesla Motors (TSLA).  In the report, we review Tesla's spectacular grow opportunities, and we discuss how the stock could quadruple in value over the next few years.  However, we do NOT invest in Tesla because it's too risky right now.  Further, the stock price is already up dramatically in the last few years.  If we ever do invest in Tesla, we'd rather wait for the stock price to pull back a little bit.  We don't want to pile into this stock right now like so many others are doing.  You know... buy low, sell high.