There are some shares that seem to be perennial favourites with investors, but this Fool would just never touch them.
I talk to people quite often about investing in shares, and once they hear I have an association with The Motley Fool they often assume I'm some sort of investment whiz and almost blush when they mention their favourite shares, expecting me to beam with approval.
Marks & Spencer
High street favourite Marks & Spencer (LSE: MKS) has always seemed to be one of the most popular, with people saying things like "Of course, you're supposed to invest in what you know, and I know it really well because I've been buying my knickers and woolly pullies there for years". But I've never liked M&S as an investment, for a number of reasons.
M&S seems to lurch from good to bad times and back again. Around the turn of the century the company was in crisis, as its traditional conservative but ageing clientele were, well, ageing and dropping off, and it was failing to attract young people to make up the numbers. Its financial performance was poor at the time too -- I thought the company was destroying shareholder value, even if the "knickers and pullies" shareholders were remaining loyal. (And as an aside, how may years was it before the stores finally accepted credit cards? That was a shockingly bad policy).
And then a few years ago the company looked as if it was reinventing itself and turned in a few good years of profits. But profits are on their way down again this year and next, and the share price is down in the doldrums again. And if I go into an M&S store these days? Well, they looks pretty much the same as they always did -- still mostly populated by fairly conservative-looking shoppers, and with a high priced food section.
High street retail has always been cyclical and risky, with high overheads, and an economic downturn is always going to wreak havoc. It's hugely competitive too, and a very hard sector in which to maintain any kind of long term advantage.
And just look at the share price over the past 10 years -- rather than a mature blue chip company that pays steady dividends, that looks more like some risky high tech venture.
British Airways
Another company that I have found surprisingly popular over the years is British Airways (LSE: BAY). Maybe it's a "flying the flag" thing, and maybe people perceive it to be a quality airline, but the airline business is a wretched one to be in.
Operational costs are almost entirely out of an airline's control, being at the mercy of world oil prices. And what do airline's compete on? With the exception of catering to a small minority of well-heeled travelers, they compete solely on price -- I fly a lot, and price is really the only thing I'm interested in. (Well, within reason -- it would have needed a very low fare indeed to get me to fly with Somali Airlines and change in Mogadishu).
And how about BA as a customer? It's 20 years since I last flew with them, and they were rather unwelcoming then. These days they're way too expensive for me to even consider, and with cosy protectionism being ever eroded and competition increasing, I can't see them figuring in my options any time soon.
Company performance isn't any better, with profits all over the show and heavy losses expected this year and next. And the 10-year share price chart has been worse than that of M&S.
BP
The other popular share I've never fancied, which might sound surprising, is BP (LSE: BP). "People will always need oil, and the biggest companies will always make profits", I hear investors say. I think they're right, and BP has been consistently profitable. And with today's share price putting it on a prospective dividend yield of nearly 8%, I think it's probably a screaming bargain right now.
But you know what's always put me off investing in BP and other oil and gas companies? It's purely because I really don't know how to value them properly. So much seems to be dependent on exploration, reserves, daily oil prices, OPEC, etc. For me, that's outside of "buying what I know" so I've steered clear of BP.
That kind of brings me back to M&S, with many people there making the mistake over the years of buying what they knew even when what they knew was a lousy investment. I think a much better way to phrase that old rule of thumb is "Don't buy what you don't know".
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