The Automatic ‘No’

My first stock purchase, in the 1980s, was from a cold-calling broker who sold me on a recently reorganized regional air carrier that “was positioned to do well.” When I checked on the stock a few times, it had barely budged. But then, six months later, it was suddenly bankrupt. I knew nothing about investing or airlines. Later I found out that the shares were from the broker’s inventory, from a secondary stock offering that had been executed to get capital to avoid bankruptcy, as it turned out. I’ve since noticed that I’ve never purchased a product or service that was presented over the phone or in the mail where I ended up happy with the result. So today, if I haven’t initiated the contact, a sales pitch gets an automatic “no.”

— Stan Ward, Dayton, Ohio

The Fool Responds: That’s a smart policy. We should dig into companies before investing in them, and we would do well to be extra careful with airlines. That’s a very tough business, facing frequent fare wars, fuel price volatility, costly empty seats, unpredictable weather complications and expensive equipment, among other things. 

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