WHO IS HOLDING YOUR HAND?
I've always thought of it as important. What is surprising to me is how many investors out there pay little to no attention to it. The people you are "holding hands" with when you invest in a stock are just as, if not more important than the fundamental picture. This becomes especially true when you are investing in restructurings -- PSTR being the most recent example.
Whenever I am investigating a company for investment, amongst the many items I look into are which newsletters, investors or institutions are recommending or investing in the stock. Companies that have less of a following and are exhibiting bullish characteristics tend to make me much more excited than a company that is being drooled on by every investor and newsletter in sight. The majority rules in congress, but sucks in the markets. Whenever you are running with a herd, you can be sure that your final destination is prancing right off the proverbial cliff.
With restructurings it takes on a whole new level importance. Why? The firm or group of investors taking part in the restructuring become the lifeline for the company. If you have an established group of investors that have a reputation for past success, are well connected and have a substantial capital base behind them --- then chances are that they will be successful with their current investment, as well.
The research report on PSTR had an equal amount of information on the activist investor involved with the company, as it did the fundamentals of the company. They should be both be weighed on equal ground. Without a competent team of investors guiding PSTR through what has been a difficult period in 2010, then the fundamentals make zero difference.
So what? They produce X amount of natural gas, have X amount of new wells coming into production, have X number of pipelines, have X as a price/earnings ratio. I have seen smarter investors than myself get bludgeoned to death by trusting in the brainiac calculations and estimates of valuation and future growth. Unless there is a catalyst --- a leader, to take the company to where it is supposed to be, nothing else will matter.
Who is holding your hand? What company do you have in your investments? If you find that you're walking alongside a hooker, odds are you are not in the right neighborhood.
