Don’t make it too personal
A site visit or a personal experience with a company can either make you love it or loathe it — but don’t let your feelings cloud your judgment
was on a day-long site visit to Renergen* last week, the second one I have done in the past 15 months. It was fun, I learnt a lot and came away not only smarter about the stock, but also with a better understanding of the strategy, risks and the management team. In short, I was drinking the Kool-Aid and this is an important point about personal experiences with listed businesses.
First, a personal anecdote is just that, personal. Maybe we had a horror experience at some burger joint or maybe it was the best burger we’d ever eaten. We come away either hating the business and wanting to short it or loving it and wanting to invest our entire net worth into the stock. Yet is one experience really a fair reflection of the entire business?
This is especially true with captured markets. I am always hearing complaints about uncaring and grumpy staff at major food retailers. But we need to eat and the large retailers offer good pricing and a range which we simply can’t get elsewhere and that is well illustrated by their profits.
What about the periodic outrages that flare up on social media, when punters urge a boycott of a company over one or other issue?
Most go nowhere but sometimes they
Ido hurt. The recent outcry against DisChem over an internal memo banning the hiring of white employees has apparently cost the company sales as many people did withdraw their scripts, taking their business elsewhere. But usually, as a rule, these cries of angst fade away as quickly as they arrive, leaving the company largely untouched.
Also consider that some business models are built almost entirely on squeezing the customer. Think Ryanair, which seems to pride itself on squeezing more money out of the customer after selling them a cheap flight somewhere. You got a bag, pay more. You want a half-decent seat, that’ll cost more, and so it goes. Nobody likes flying with Ryanair, but its flights are full and it’s very profitable as its business model works.
Going back to the site visit. I remember when Spur announced the purchase of RocoMamas. I’d never heard of it, so I took myself off for a burger and beer at my closest store. The food was good, the beer cold and the store packed. Speaking to a few other customers and staff, some regulars commented that they loved the place and staff confirmed it was always busy. Did it make me rush off and buy Spur? Nope. But it did help me understand that it looked like a good purchase for the company, though the risks were still there, such as the price Spur had paid and the rollout of well-located new stores.
So, yes, a personal experience is real and of value. But don’t forget that a successful listed business is a large organisation with many moving parts.