What The Bachelorette Can Teach You
Scheduled to debut on Jan. 8, ABC's Wednesday night reality television series The Bachelorette is indubitably an odd place to look for investment smarts. But dating and investing both involve fun, fantasy, fears, tears, hope, dread, ferreting out hidden facts, and, often as not, disappointment. Also, The Bachelorette figures to present many lively scenes in hot tubs; investors, of course, take frequent baths.
But does bachelorette Trista Rehn have anything in common with individual investors?
True, most of us aren't as bikini-ready as this 29-year-old pediatric physical therapist from Miami. Yet in many ways, the task she faces is like our quest to pick a winning stock. From among 25 men chosen by the show's producer, she aims to find a fiancé. As Trista dates them in upcoming episodes, we can watch her cull all but the one she believes promises her a lifetime of love.
Sounds safer than stock-picking.
Not really. The U.S. Census Bureau counts 8,602,000 single men near Trista's age. Yet she must select from just 25 guys. And what a narrowly drawn group they are. The show's producer required the bachelors to be childless U.S. citizens who were willing to skydive and parasail. They describe themselves with such adjectives as "adventurous." To a man, they are hunks.
So you think Trista's soul mate might instead be a meek, homely single dad with a green card, one whose idea of an extreme sport is hitting the laundromat on Saturday morning?
Thing is, you never know where Cupid's arrow will fly. Same with investing. It's a fact that meek, homely small-cap value stocks have made better bets than hunky large-caps or sleek growth stocks. From 1926 to 2000, big growth stocks returned 10.8% a year on average. Little, beaten-down value stocks? 14.9%. Those, however, are rarely the sort that Wall Street firms talk up. A year ago, how many investors had their brokers suggest buying into that hot textile company, Dan River? Or that promising Hecla Mining? Yet of the New York Stock Exchange's 2,798 companies, those were two of last year's top performers, up 400% and 438%, respectively.
How can you know Trista won't find a big winner among Billy, Bob, four guys named Brian, or one of the other 19?
I can't. But consider this lapse: As the show was taped last fall, Trista avidly romanced the bachelors. "Sensuality is an important part of a relationship," she said. "I'm not going to shy away from that just because there are cameras." Yet she barely touched on a topic that causes even more marital strife than in-laws and sex: money. "Definitely," Trista told me, "I didn't focus on money."
In the heat of her love quest, Trista avoided exploring a key to marital longevity, compatibility on money matters. In just this way, too many investors ignore a key to investment success--that is, corporate debt control. Seasoned investors everywhere tell rueful tales of letting the allure of hot earnings growth (the investing equivalent of sex) blind them to the risk of too much debt. Who wants to talk coverage ratios when you can focus on profits? You didn't have to own a fraud like WorldCom (WCOEQ ) to suffer this way last year. Anyone owning even Ford Motor learned this lesson the hard way.
Is Trista worried that she took too many shortcuts on her journey?
Not a bit. "This definitely was the most worthwhile experience I could have ever lived through," Trista told me. "I have no regrets whatsoever." My translation: Like so many investors, her heart has taken control of her head.
Enough of your depressing negativity. Did Trista spill which bachelor she picked?
The show's producer would have killed her. "I can't tell you whether or not I'm engaged," she said. "But I can tell you I am in love." Here's hoping she feels this well-off a year from now.