Friday, February 9, 1996
Sports Talk Investing
by MF Bootup

There's a story here in Portland that's perhaps apocryphal, but I like it anyway. A few years ago, when the Boston Celtics were in town to play our own NBA heroes, the Trailblazers, a fanatical fan found himself in a hotel elevator with several Celtics, including the legendary Larry Bird. The fan, unable to resist such a golden opportunity to talk a little trash, burst out, "Hey, Larry, we're going to kick your butts tonight!"

Grabbing the man by the collar and yanking him forward until their faces were only a few inches apart, Bird snarled back at the startled fan, "What do you mean, WE? Are YOU going to be out there on the court?"

Like sports fans who identify too enthusiastically with their favorite teams, shareholders' egos sometimes get over-invested in "their" companies, as demonstrated by hyper-defensive reactions to bulletin board criticisms. People who diss your favorite stock may actually be providing useful information, even if their manner is tactless and their motives suspect. But if you can't keep some emotional distance from your stock, you may lack the objectivity to evaluate contrary information calmly.

Another hazard of the fannish approach to investing is the way investors, like sports fans, sometimes cast competitive battles as morality plays of Good against Evil. Apple is the classic example. It's one thing to prefer Macintoshes over PCs; it's quite another to buy Apple stock because you're sure the company's bound to triumph against the evil "Wintel" empire. (Check with former Atari and Commodore investors on how well this approach works.) Liking a company's products can be a pointer (and no more) to investing in that company, but LOVING a company's products may be a sign---one that says you should invest in any other company BUT the one you love, because you can't be objective anymore about its strengths and weaknesses.

Back when our Portland Trailblazers were an energetic contender, the fans whined incessantly that the team "gets no respect," meaning that the Eastern news media were in a conspiracy to ignore Portland because they only wanted to write about Chicago, New York, and LA. It seemed to me then, and still does, that the way you get respect is by winning. If you're a relative unknown from the sticks, it may take a little longer, but there's no other way.

The complaints in the Iomega folders about the media badmouthing that company remind me of those basketball fans. The complainers have it backwards. First comes financial success, increasing revenues and profits, and---torture for the instant results crowd---this has to continue longer than a quarter or two to be convincing. All the bulletin board messages, Dorfman reports and Greenberg columns in the world aren't going to change that relationship. Media respect doesn't cause increasing profits and higher stock prices. Increasing profits and higher stock prices bring media respect.

I confess to ambivalent feelings about all this. I was fortunate enough to discover the Foolish Iomega discussion when it was still in its original folder. The perceptive research I found there, combined with my experiences in the computer industry, inspired me to buy the stock in the early days of its great run-up. In fact, Iomega became a textbook example of how online investors can ferret out and analyze impressive opportunities long before they pass across the periscopes of the Wise.

Now, the Iomega folders have in part become a victim of their own success. Much of the activity---trash talk, trivia, tick-by-tick scorekeeping, manic mood swings---comes across as a parody of sports talk at its worst, not to mention the antithesis of Foolish Investing. There's still outstanding analysis and research to be found there, but tunneling through the trivia to find the nuggets has become a daunting task. (Fortunately, MF Jimbo has created a separate folder in the Storage Tech section of the Industry Research Area where you can find important news and comments without engaging in such herculean efforts.)

So, when you're in the mood for jumping up and down and cheering yourself hoarse, head out to a Bulls or Bears game (if you live in Chicago, that is; otherwise patronize the wildlife of your neck of the woods), and don't forget the Motley Fool's own on-line sports area (keyword: FoolDome). Cool and deliberate contemplation away from the roar of the crowd, however, remains a better state of mind for approaching your investment decisions.

[Editor's note: Steve Kahn, aka MF Bootup, has worked as a high school teacher, typesetter, technical writer, tech support person, and now teaches adult education classes in computer applications and Internet use. Along the way he authored a book on Microsoft Word for Macintosh.]