Friday, March 06, 1998

Stocks and Sport-Utes
By Jim McGuire ([email protected])

It seems that the Wise are everywhere.

I've recently read several articles in the press about how dangerous sport utility vehicles are. When a sport-ute and an economy car are involved in an accident, statistics show that the driver of the economy car almost always comes away with more damage. The Wise are lobbying the Department of Transportation for restrictions on sport-utes to protect drivers of the ubiquitous econo-boxes (econo-boxi?)

I would note that the number one and number two best-selling vehicles in the U.S. are the Chevy C/K 1500 and the Ford F-150 full-size pickups. And please disregard that 80,000 pound, 18-wheeled Kenworth tractor-trailer in the right lane over there.

Sound insane?

Perhaps, but no more insane than the stock market's reaction to a company that misses its First Call earnings estimate by a penny or two. Companies that are growing like weeds and posting impressive earnings get hammered by the Wise and their "oh-my-gosh, sell it now" reactions.

The important distinction to make is that the posted earnings are real, while the First Call estimates are just that -- somebody's guess. Granted, it may be a very educated guess, but it's still a guess.

Of course, there is a benefit of this behavior to the Foolish investor. With the Wise driving the price down, the stock becomes an even better bargain. So keep an eye out for companies that get undeservedly beaten-down by the market. There are a few gems out there.

In the meantime, while I'm waiting patiently for my Foolish stocks to appreciate, I'll be parking my Jeep Wrangler on the front lawn, safely away from the neighbor's Hyundai.

Have a similar tale?
Talk about it in the Fribble Message Folder!