That evil guy Warren

[Warren Whitmore]

I have always invested like a robot following the advice of Ben Grahm in his 1936 book Security analysis. I know its old advice but it works for me. I have beaten the S&P by atleast 10% every year for the last 10 years. Any way whenever I am asked what I am currently invested in I invariably get the comment "How could you invest in that company they make bulletts, cigaretts, bombs, pollute the atmosphere, ect?" I always answer that it is irrelevant which companies that I own stock in as it has no bearing what so ever except in the following 3 areas.
(1) Initial public offereing.
(2) The company is in finatual trouble and the stock price could be tied to thier finance rate.
(3) My vote will affect how the company performs.

Outside of these (none of which apply to any of the stocks I own) I argue wheather I own a stock or not is irrelevant to what the company does. Am I right about this?

[midas]

Warren:

You are very right. When you buy a stock technically you own a piece of the Company and a right to vote for the Board of Directors. But as a small investor, your vote is insignificant and management could care less if you own the stock - your only true right - is the right to sell and potentially drive down the stock price.

On your points:

1. As a small investor, you're unlikely to effect an IPO going well.

2. Financing rates are rarely tied to stock price.

3. You're vote doesn't matter and in most cases large institutional investors mostly vote for mgmt.

If you actually beat the S&P 500 by 10% each year, you should quit your job and become a fund manger. Stansky (the guy who runs Magellan for Fidelity) can't claim the same record and gets paid $15 million+ per year.

[GeorgeF]

If you own stock in a company, you tend to want laws and other events to go in favor of that company. So you vote in general elections in a differnent manner and if people ask you you opinion you are likely to answer in a way favorable to your positions.

For example I have invested alot in international bond funds. I find myself hoping for a fall in the US$ even though I know that will create hardships for many of my neighbors, especially low income types that drive to work. Some Americans would however benefit from a fall in the US$ depending on circumstances.

[FatOtt]

[ QUOTE ]
Outside of these (none of which apply to any of the stocks I own) I argue wheather I own a stock or not is irrelevant to what the company does. Am I right about this?

[/ QUOTE ]

I don't think you're right at all. Obviously, you buying shares of stock on a secondary market rather than in an IPO doesn't put money into the coffers of the firm. However, the fact that there will be willing investors in that secondary market is what makes IPO investors willing to purchase shares in the IPO to begin with.

Your willingness to buy shares increases the ease with which a firm can issue them, even if you're not buying from the firm directly. So yes, if you’re willing to buy shares in, say, a tobacco company, you are helping that firm.

Bad Analogy: You buying hamburger from a grocery store doesn’t kill a cow directly. What you’ve bought was already dead. However, you buying the hamburger will lead to future dead cows because you’re part of the overall demand.

[Nemesis]

Who really gives a [censored]... it's like taking money from bad players in poker. If you don't do it somebody else will... why not profit off of it yourself?

[holman3rd]

[ QUOTE ]
Warren:
If you actually beat the S&P 500 by 10% each year, you should quit your job and become a fund manger. Stansky (the guy who runs Magellan for Fidelity) can't claim the same record and gets paid $15 million+ per year.

[/ QUOTE ]

This comment is laughable on so many levels. If you put that track record in a cover letter and sent it to a fund company, you'd be lucky if someone in HR even read the letter, let alone gave you an interview.

[MaxPower]

If you refused to invest in any company that might do harm in the world, there would be no companies left to invest it.

[Warren Whitmore]

Hi midas,

A mutual fund could not invest the way that an individual can. They must obey rules which essentially nullify value investing.

[Warren Whitmore]

Hi Fat,

There is enough controversy about this that I have sent the origional question to Marion von savont. If she sends an answer I will be sure post the link.

[midas]

What rules? There are mutual funds and managers who are value investors.