Friday, October 13, 2006

Invest in what you buy

Recently (August 12th), I read an article in Barron's about Whole Food markets. WFMI had reported good earnings the previous quarter, which were however below the high (inflated) expectations of some analytics. As a result the stock had been oversold. The article discussed how Whole Food markets was a great company, with innovative ideas to increase sales/sq ft, with quality products and a high level of customer satisfaction. In other words, a great company to invest in. The low stock price made it a great buy.

I was ready to invest, but realized that the Barron's effect [1] might kick in Monday morning. Indeed, Monday it jumped +7.5%, Tuesday, +5% and the stock quickly became no longer undervalued.

The bigger story here is to look for investments among the quality products your buy. It is much harder to hope for great earnings from companies selling poor quality products. Instead, if you focus on companies you love because of their great quality, or good customer services, you already have a shortlist of companies to investigate and find a few undervalued ones.

I decided to create a short list of my best price quality buys:

And a short list of stores and service companies for their great customer service and quality offering:

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