Bill Poulos on Why the Media and the Latest Sensational News Regarding Corporations is Not a Good Way to Make Investment Decisions
Bill Poulos was born and raised in Michigan. He is married and has three sons. He is the co-founder of Profits Run, Inc., a company dedicated to educating individuals on how to invest more simply and with proper risk management. Bill supports charitable causes that truly help people, especially children, such as Detroit’s Downtown Boxing Gym Youth Program. Bill Poulos worked for General Motors over the course of 30 years. In 2001, he retired from GM as an executive and moved on to create Profits Run. He holds a bachelors in engineering as well as an MBA with a finance major. Poulos is author of Simple Options Trading For Beginners.
The latest investigation by the government into Facebook’s activities is going to be something that we’ll see more and more of as the government struggles to keep up with rapidly evolving technology. In particular, we’ll see more government investigations into things related to the internet, cryptocurrencies, and those types of things.
The security of data is important. Of course, the government should do whatever they can to ensure the security of this data. On the other hand, certain government officials may have used their concern for data security and supposed political misuse of data as a ruse. But nevertheless, these types of things will go on and on as we go forward.
This government investigation into Facebook will have a minimal impact on the company. Facebook will do just fine. There will be other investigations regarding Facebook down the road, but Facebook will continue to expand and will continue to grow. The Facebook stock, in the long run, could be a good long-term hold.
If anything, when these types of things occur, the market may sell off stock for the company that’s involved in the investigation. When people sell off their stock in a company that is getting bad press, it usually provides a great buying opportunity.
A good example of government investigations and media hype affecting a stock price is the investigation of Wells Fargo. About a year ago, Wells Fargo was accused of fabricating new customer accounts to generate commissions for Wells Fargo employees. While the investigation was going on, Wells Fargo stock did indeed drop, and there was indeed abuse. Wells Fargo was duly penalized for their indiscretions.
However, Wells Fargo is a very, very strong and very powerful bank. It will continue to be strong and powerful — even after the investigation, negative media coverage, and stock dipping. That particular episode proved to be a great buying opportunity for Wells Fargo stock.
Another example is the British Petroleum (BP) oil spill in the Gulf. That was truly a disaster. BP owned up to their shortcomings, and duly paid whatever fines were imposed upon them, including the cost of cleanup and including the cost of putting irreversible corrective actions in place so this wouldn’t happen again.
All during this episode, analysts had BP actually in financial trouble. The way analyst saw it was that BP may never be able to recover. They thought that this could be the end of BP. Well, all that was nonsense. And again, it was a great time to buy stock. BP’s stock fell because it was under duress. The talking heads in the media talked the stock down creating a great buying opportunity. BP is doing just fine.