Real-Life Decision Making -- Solution
You recommend they buy more shares of Top Choice.
You know that Top Choice Electronics is an excellent company with a strong
reputation. You feel it's dropped as far as it can go and the only way left
is up. So, you recommend that brokers purchase more shares of Top Choice stock
for their clients instead of selling. As for those who are very nervous, you
recommend they at least hold on to the stock for a little longer.
This is the real-life decision made by market analyst Murray Leith. "If
the majority of experts think it's a bad investment, that has a negative influence
on the stock price, which goes down. At some point, the stock will have fallen
far enough that it's already discounting the negative news that's out there,"
says Leith.
Murray has an investment style that is fairly unique. "It's 'contrarian,'
which means that most of the time, we recommend investment action that flies
in the face of conventional wisdom. Typically, we like companies that are
getting a fair amount of negative press," he says.
His firm's view is that if a company is getting a lot of negative coverage,
it may have more to do with people's opinions than fact. "Our view is, can
the opinion of this company get any worse, or can it only get better?"
As the product problems are solved, the public's opinion of Top Choice
begins a slow rise. The clients who chose to purchase this stock at its rock
bottom price begin raving about the ingenious decision your investment firm
made in purchasing Top Choice stock.