Disclaimer – On Recommending Stocks

I get asked to recommend stocks. Sometimes I will post on the Rule #1 Blog about things that I buy or sell, or don’t, so you can see how it all works, but I won’t be recommending stocks here or anywhere else simply because recommending stocks goes against my Rule #1 philosophy.

Rule #1 is about owning a business, not investing in stocks.

Owning a business is an intimate expression of individual values, knowledge and understanding. It is a very personal reflection of who you are as a person. When you own a business, the management of that business represents you to the rest of us. So do all of your employees, including how your business treats your employees. So do all of your products including how your business treats your customers and the world we live in.

You can pretend that there is a wall that protects you from what your business does in and to the world, but there isn’t. What goes round comes round. Karma. Do unto others…. Reap what you sow.

However you want to say it, you can not avoid the responsibility of ownership. If you are the owner of a company which is damaging the earth in a short-sighted attempt to rake in the money with the objective of leaving the clean-up to the next generation, then what does that say about you as a person?

If your business hires a manufacturing facility that employs slave labor, do you really think you can escape the karma?

If your business sells irresponsible products to irresponsible people, you own the results of that just as if you owned the entire business. You don’t get to escape just because you own a few shares. And by the same logic, if your business is doing great things for all the stakeholders – customers, management, owners, employees and vendors – that accrues to you as well.

By the way, if you own bad stuff, don’t blame Capitalism. Capitalism has its flaws, but one of the most ignorant criticisms of Capitalism is that Capitalists hold the dollar to be the ultimate value. That may be true, but only in the sense of a dollar earned. If you choose to own a business run by amoral managers who see no harm in fleecing the customers, abusing their employees and contracting with immoral and unethical suppliers then your dollars are not earned, they are stolen and that is on you, not on Capitalism.

Chances are that same management team that figured out how to rip off the customer is finding a way to rip you, the owner, off as well. You do a deal with the devil, don’t be surprised if you get burned.

All of this just to tell you that you must decide for yourself. I can’t do it for you. And you can’t copy what I do. I’m not you. I don’t know what you know and what you value.

Look at how different my choices are from Warren Buffett’s. I bought businesses that do management software, internet search engines, bioscience, natural foods, beer and wine and ethical drugs because I understand them and I’m proud of my teams and products. I like what these businesses are doing to and for the world.

I don’t necessarily buy the same businesses as Warren Buffett. He owns or has owned (among others) soft drinks, burgers, tobacco, beer, furniture, diamonds, jets, mobile homes, advertising and a newspaper. But he feels the same way about his companies and products and the folks that work there as I do – in a word – proud.

I’m not going to give you recommendations because buying based on someone else’s recommendation is stock picking. I don’t do stock picking and neither should you.

I own businesses that I am proud of. And so should you. To be proud of your business, you must understand it. Only you know what you understand.

And therein lies the strength of Rule #1. Buy what I understand and you are gambling. Buy what you understand. Buy it at a good price. And you are certain to make money.

Now go play!

Phil Town

Leave a Reply

Your email address will not be published. Required fields are marked *