Caitlin’s Investing Tip, Part II

By Caitlin Rosberg

I’ve learned a lot here at WeSeed: How to evaluate stocks, the role of public sentiment in the market, and the importance of a Twix bar in the afternoon. Mmmmm, carmelly chocolatey cookie….

But the one of the most important (and hardest) lessons I’ve learned here is this: Don’t believe the hype. This is especially hard to do for me, since I usually take most of my stock advice from the lyrics of Chuck D.

I understand the desire to get the newest, coolest device; or the most fashion-forward, must-have accessory; or the hottest, most popular, most awesomest item you find yourself drooling over.  But there are usually two reasons for not buying the <insert shiny, pricy new item here>: either you can’t afford it, or you’re waiting until all the bugs have been worked out.

Both of these are good, responsible reasons for eschewing the big buy, but let’s focus on the second one: when a new gadget or piece of software comes out, the internet becomes awash with reviews. People pore over these products, looking for defects, making sure that they don’t buy or download something that they’ll regret later on.

This is a good rule of thumb for investing, too.  Even if it’s not a rumor but a known fact that a company is going to announce or preview a great new product, you can’t count on it going well.

Look at the negative press that Microsoft earned with Windows Vista: for years people were mocking it, and still are.  It’s been credited (or blamed) for everything from Apple claiming a much larger market share to the difficulty Bing (Microsoft’s new search engine) has had getting off the ground.

The bottom line: Vista didn’t bring the tech giant down, but it certainly put a hitch in their step, and could teach us all a valuable lesson about being a little cautious when it comes to the Next Big Thing.

The tech industry is definitely one of the worst offenders with this problem, but it’s not limited to netbooks and bigger, thinner TVs.  There are examples everywhere of products that just didn’t do as well as they were supposed to, and the PR nightmares that follow stuff like engines or tires exploding everywhere, a drug having major unknown side effects, or mines collapsing on top of workers.

I’ve heard everyone from football coaches to war veterans say that the best game plan in the world is worthless the second that you try to execute it in reality. Why? Because you can’t plan for all the variables. This is definitely true in investing.

Verdict: if you’re ok with having a little wool pulled over your eyes, go for it.

The Colonel’s Stock Gets Fried

Photo by Getty Images

by Erica Feldkamp, WeSeed Writer

Do you still believe the old chestnut that even bad publicity is good publicity?

Think again.

KFC (YUM) got a wing up on competition thanks to Oprah clucking about the new finger-lickin’-good grilled chicken last week. The daytime TV queen mentioned an online coupon for free chicken, which led to a 5 million person stampede on the chicken chain. You would think that would be good press, right? Wrong.

Many of the chicken-hungry Oprah watchers were left standing in some very long lines. And unfortunately, some of these folks also happened to be bloggers who ranted mercilessly about KFC’s poorly prepared restaurants.

During the week of the free chicken promotion, KFC’s stock dropped 8 percent. Coincidence? Maybe not, since similar stocks like Burger King (BKC) and McDonald’s (MCD) only dropped 3 percent over the same period. So the question begs: Did investors get skittish watching millions of freebies walk out the door, or did bloggers sway Wall Street?