How Do You Put a Price on Love?
Liz is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you love a product, you will most likely buy that product, and your price sensitivity will be inversely proportional to how strong your feelings are. Add to that a company that is well-run, and it only makes sense that in combination with "love," this stock will outperform its competitors over time. I am a former marketing person, as well as an undisciplined investor and yet when it comes to the stocks that I've picked based on "love," my overall rate of return has been in excess of 40 percent. And why is this?
The experts on the street really don't feel comfortable discussing the "love equity" inherent in certain stocks. Stocks that deliver to consumers a feeling, an outlook, or a benefit, and/or all three of these. We have seen this with Apple (NASDAQ: AAPL) versus Microsoft (NASDAQ: MSFT). Back in 2003 when I planned to put $6,000 in Apple instead of MSFT because I loved the Apple products (as did everyone else that I knew who owned an Apple), my Wall St. friends told me I was misguided. They said that ultimately, Microsoft would rule the world and that Apple would be out of business. I argued that in business school and at every corporate job that I had I was always forced to use a PC, and I always hated them. However, I loved my Apple as did every other Apple user. To the contrary PC people didn't love their PC's, but rather spoke of them in terms of cost, efficiency, and speed. Who cares about that stuff when you're in love! And, that love translates into loyal sales, increased stock price, and consistent growth. In the past year as we know, AAPL has returned 74.62 percent.
Let's move onto another one of my picks, Whole Foods Market (NASDAQ: WFM). I am a life-long vegetarian, who is passionate about good health, the planet, and the humane treatment of animals. I seek out organic foods, stores that support sustainable farming practices (there are so few), and stores that have some modicum of "ethics" built into their business plan. Although in my town there are four large grocery chains within a 5 mile radius of where I live, I will instead drive 12 miles to shop at a Whole Foods. I also will pay more every time and I know that. Despite the inconvenience and higher cost to me, I love Whole Foods since they are closer to my set of core beliefs about health, the planet, and a vegetarian lifestyle. So, it only makes sense that if I exist, that there are others out there like me, and we are growing in numbers. We are passionate about our food and willing to pay more for taste, health and ethics. All very squishy I know, however, WFM is up 48.72% in the past 52 weeks.
Another one of my picks is the Limited (NYSE: LTD). While many of you reading this have never personally worn Victoria Secret clothing (I hope anyway!), I must say that when you do - it makes you feel great! The store does a terrific job of branding their products to women, so that every woman can spend $30 and feel like a super model. Further, they have loyalty programs that get you in the store every month, and that is brilliant marketing. Victoria Secret is a household name, while other retailers are simply "retailers" which specific demographic groups know. Everyone and their brother knows the Victoria Secret name! LTD is up 13.44% in the past 52 weeks.
My final pick is Petsmart (NASDAQ: PETM). And, I know for a fact that people who love their pets REALLY love their pets! I have 6 rescue animals, and while I sometimes order pet food online, I am more apt to go into the store to buy it. I like to look around and I like spending money there since they support adoption events, local shelters and low-cost vet care clinics. There are just too many homeless shelter pets that are euthanized every year, and Petsmart is wise to promote adoption since we "animal" people are very loyal to the retailers that do. Again, the love factor makes me loyal to Petsmart and their stock is up 48.68 for the past 52 weeks.
So you see, the emotional component of love - whether based on a product (Apple), an ethical approach to health (WFM), a sexy lifestyle (LTD), or event-centered support of rescue animals and companion pets, (PETM) - those characteristics make me hang onto the stock when it dips, ignore the bad news when it comes, and buy more stock when I can. I guess you can say that I am a sucker for love. Funny thing is I've never had good luck with love when it comes to men, but I have had good luck with these stock picks! I hope that you do to!
CoachLizzy is long AAPL, WFM, LTD, PETM. The Motley Fool owns shares of Apple, Microsoft, and Whole Foods Market. Motley Fool newsletter services recommend Apple, Microsoft, PetSmart, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.