October 16, 2012
Written By Chloe Lutts Jensen
I avoid watching TV news, especially during election season. I prefer to read the newspaper, where sensationalism and entertainment still take a backseat to information most of the time–and I can always skip some parts. But I do love TV for entertainment, and one of my favorite shows is Jon Stewart’s comedic “news” show, The Daily Show. On October 10, Stewart and his writers did a fantastic bit on election opinion polls, and the media’s obsession with tracking them minute-to-minute.
Stewart’s point, briefly, was that political opinion polling, followed by analysis of the polls, has become so incessant that the data is approaching the point of uselessness. The political media obsesses over and tries to explain every percentage-point change in dozens and dozens of polls, while at the same time criticizing many of the results in an attempt to rationalize away conflicting poll numbers. Or, as Stewart puts it, the polls are “divergent, useless, yet accurate and quotable.” And new polls are released every day, followed by the media’s dutiful attempt to find meaning in the new numbers.
Watching the segment, I was entertained and frustrated at the same time, but I also had a third thought … this sounds familiar.
The behavior of news anchors with new poll numbers seemed remarkably similar to that of investors following stock prices, economic data and company news day after day. Every new data point, no matter how insignificant, must be analyzed. A company’s stock trades down slightly more than the market, and the cause must be pinpointed. Did analyst consensus shift nearly imperceptibly to the downside? Maybe you should sell. Was the move just in reaction to news from another company in the same industry? Probably okay to hang on.
You could ask these questions, probe for “reasons” and make decisions every single day. But, as with pundits debating the significance of a one-percentage-point increase in Romney’s chances in one poll, the discussion is pointless and the conclusions meaningless.
Stocks, like opinion polls, move a little bit day to day. Unless the day’s trading is unusual in magnitude or volume, it usually means nothing. Investigating your stock’s everyday trading for meaning is like looking for the likeness of a religious icon in your coffee dregs every morning–you might find one, but it doesn’t mean anything.
Most investors know this, but sometimes the unending chatter of MSNBC and a thousand online pundits can still suck you into the minutiae despite your best efforts. So when you find yourself obsessing over a particular stock, or interpreting one day’s homebuilding numbers as the sole indicator of where the economy is going over the next 12 months, try to take a step back and do what those poll-addicted pundits can’t: remind yourself that the long-term trend is only visible if you take a step back. That focusing on one detail after another is like looking at a puzzle one piece at a time. And that such behavior is unlikely to make you any money in the stock market.
Political pundits are paid to have something to say 24 hours a day: they have to analyze every number they see to fill air time. Unless you’re running your own 24-hour investing show, you don’t need to.
Especially if you’re feeling stressed about one or more of your investments, try taking a step back and ignoring some of the less important data. You just might be surprised to actually see your portfolio’s performance improve.
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“Jarden Corp. (JAH) manufactures, sources and sells consumer products worldwide. Like what? Rawlings baseball gloves, Coleman camping gear and Sunbeam appliances. Jarden is also one of the world’s biggest makers of ski equipment, and its wide-ranging portfolio includes baby care products like the Nuk brand and outdoor gear like Marmot and K2. Bicycle playing cards and Mr. Coffee are in there, too.
“With a market cap of $4.07 billion, this Rye, N.Y.- based company owns more than 120 brands, according to its CEO. Revenue has gone from about $300 million in 2002 to $7 billion in 2011, with 40% of its sales generated internationally. Analysts praise the company for revenue growth, solid stock price performance, EPS growth, ROI and good cash flow from operations. It has a P/E ratio of 18.6, above the average consumer durables industry P/E ratio of 18.4 and above the S&P 500 P/E ratio of 17.7. In the last 12 months, management has reduced shares outstanding by 12.7%. Buy.”–David R. Fried, The Buyback Letter Premium Portfolio, September 22, 2012
Wishing you success in your investing and beyond,
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Tags: Jarden Corp. (JAH)