This Time, It’s Personal

Not too long ago, we were reviewing the retail segment of the Consumer Services sector (which happens to be one of my favorite sectors to research – so much more interesting than Industrial Materials. Ball bearings? Kill me now.) We were discussing the relative merits of Target versus Wal-Mart, always a lively debate. After a careful dissection of each company’s fundamentals, financial strength, and growth prospects, the committee voted to sell Target and move the proceeds into Wal-Mart, as the latter looks like the better investment. And I, in my role as impartial provider of research, wholeheartedly agree with that decision.

However, as a consumer and Target devotee I find it difficult to reconcile this with my personal feelings. I avoid Wal-Mart like the plague. To be fair, Wal-Mart does provide a plethora of goods and services for a low price, something that everyone needs when times are tough (and even when they aren’t). I just don’t like the idea of buying tires and grapes at the same store.

My point (and I do have one) is that it can sometimes be difficult to put personal ideas/prejudices/feelings aside when evaluating investments. At what point do you let those biases influence your portfolio? It all depends on how strongly you feel about them, in my opinion. Take the Target/Wal-Mart example. As an investor, do I really feel so strongly about my shopping experience that I would eschew buying WMT stock in favor of TGT, regardless of the fact that WMT clearly looks more attractive? Definitely not. I have no problem (in my mind) being a shareholder of one and a customer of another, hypocritical as that might seem. I might draw the line at buying the stock of a tobacco company, though, even though the fundamentals look fabulous. Of course, I am invested in several different mutual funds, any of which may own stock in tobacco companies, and I have to admit I have not checked into that, nor do I care to as long as the funds are performing well. I realize that’s completely illogical, but as I am a human and not a Vulcan, I’m allowed to be illogical.

Some investors, on the other hand, feel more strongly than I do about their individual stocks AND their mutual fund holdings, which leads us into the realm of Socially Responsible Investing, a topic to be more fully addressed in a future blog (I can’t use up all my topics at once, you know). At the moment, I’ve got to run to Target to buy 3 things I need and about 20 that I don’t.


Sarah DerGarabedian

Research and Trading Associate

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