The Bigfoot Portfolio: Let Sleeping Yetis Lie
Jon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
No one has ever offered irrevocable proof that Bigfoot exists. Therefore, a thorough and accurate taxonomy is impossible. We hear reports that he may be between 7-10 feet tall and weigh 200-600 lbs. He also could possibly be strong enough to push over trees and hurl large boulders at Boy Scouts and lumberjacks who wander too far into his domain. We can't be exactly sure what this beast is capable of, but if I ever came across him sleeping, I think I would just leave him alone. Common sense seems to indicate that it would be best to let sleeping yetis lie.
In my article The Bigfoot Portfolio, I talked about how we can't overlook good investing opportunities while we look for perfect investing opportunities. That "perfect" stock might not exist. However, this looks over the fact that there are companies that have everything going their way. There are stretches where things seem to be perfect.
But that's until the yeti is awakened. Management sometimes makes a decision that destroys their coveted "perfect stock" certification. When that happens the fallout can be devastating.
Changing the Game Plan
Many thought that Netflix (NASDAQ: NFLX) was the perfect stock. There were some bears, as there always are, but if you looked at Netflix's performance, it was hard to argue against perfection at the time. Some have called Reed Hastings a visionary for Netflix's shift from mail-in DVDs to online streaming. Visionary though he may be, he's certainly not a prophet. He didn't see the fall-out from the Qwikster idea and the price increase coming. Long story short, the consumer felt shafted, and Netflix is still trying to stop the bleeding. They've lost many subscribers and over $10 billion in market cap since the fiasco.
Although I don't think many people saw Hewlett-Packard (NYSE: HP) as a perfect stock, management did decide to shake things up dramatically. They announced in August that they were going to spin-off their PC business. To me that sounded like Starbucks announcing to spin-off their coffee business. But then, HP announced that they'll be keeping the PCs. This back-and-forth leaves investors like us wondering what the future holds for HP and its profitability.
Both of these situations don't make sense. My Grandpa used to always say, "You don't need to fix what's not broke." Trying to fix something that isn't broke makes about as much sense as waking a sleeping yeti.
Apple (NASDAQ: AAPL) is considered, by many investors, the perfect stock and the perfect company. The journey from its humble beginnings in Steve Jobs' garage to the $537 billion empire it has become has made quite a few people rich along the way. Apple has revolutionized the way we listen to music, innovated the way we consume media, and things that are white (like coffee cups and headphones) are now cooler than those of another color. They haven't only been good for investors, they have given rise or new life to many other companies like Cirrus Logic, Skullcandy, and Rovio (the Angry Bird people).
I can't help but thinking that management is poking their sleeping yeti with a stick. The company doesn't do everything the same way that they did when Steve Jobs was in charge. On one hand that's fine; everyone has their own ideas and pursuits. But what has got me a little concerned is they are doing things that Jobs would never have done.
The iPad Mini is the first example of this. Steve was always against the idea. He was a stickler for "perfectly sized" devices, and the Mini never fit into his ideals. But under the new CEO, it wasn't long before this was coming down the pipeline. Now, Jobs isn't infallible. In this case I actually believe the iPad Mini is going to be a great product for Apple. But you can appreciate the argument that this demonstrates that Apple is now playing copycat to Samsung, rather than the other way around.
But it's more than just the iPad Mini. Apple is involved in other things their founder was against. Siri is something Jobs apparently never liked. Jobs also was big on new products being superior to previous products in every way. The iPad 3 took a step back in battery life and size compared to the iPad 2. And then there's the dividend issue. I like dividends, but I understand the argument that a tech company has to stay innovative to stay relevant. They need as much money as they can get to be able to accomplish this.
These changes in Apple might eventually cause them to fall from grace in the market.
I used the Motley Fool stock screener to look for stocks that might, just might, be considered perfect right now. What I came across were two companies that potentially fit that bill: Thor Industries (NYSE: THO) and Manitex International (NASDAQ: MNTX).
Thor Industries is in the recreational vehicle market. They have RVs that you tow behind you, ones you can drive, and they have a bus segment of the business. Not exactly a paradigm-shattering industry. But when you look at this company's fundamentals, you'll like what you see. They have been growing revenue by an average of 26% over the past 3 years, and their earnings per share grew over 17% last year. This has caused shares to appreciate over 75% this year so far. They offer a humble but stable dividend as well.
Manitex International is involved in providing "engineered lifting solutions." In case that seems vague to you, they make things like cranes, boom trucks, and, you know, stuff that lifts other stuff. This company has also been on a winning streak. Revenue has grown 42% the last 3 years, and net income has grown 55% during the same time. The stock price has nearly doubled this year.
With both of these companies, things are going their way. As an investor, I don't want a big change in leadership or a big shift in vision. What they are doing is working. It's profitable. I don't want a "fix;" I want more of the same.
Companies need to be innovative. They need to plan for the future. But when things are going great, a big shakeup is not needed. There is no need to wake up a yeti. Although we can't be 100% sure what the groggy monster will do, I'm willing to guess it won't be pretty. Let sleeping yetis lie.
thequast has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Netflix. Motley Fool newsletter services recommend Apple and Netflix. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!