“It must be true, cause I read it in the papers, didn’t you?”
This is the title of a song from the Musical “Can Can” written by Cole Porter. Along with my good friend Dean Anderson, we mangled this and a raft of other tunes whilst performing in the school musical production back in 1981. Thankfully for all involved, I abandoned my ambition to make a career out of musical theatre and entered the world of finance. (Dean, quite wisely, embarked on a career in Forestry).
The reason I reminisce about this show tune is that it made me realise lately that, the more things change, the more things remain the same. “Can Can” was set in the 1890’s and this song was a warning back then that you shouldn’t believe everything you read in the press. This is particularly true when it comes to investing. Unfortunately, a lot of very clever journalists and marketers suck us in to thinking that if it appears in the media then it must be true. The truth is it is usually just “noise”.
Jim Parker, Vice President of Dimensional Funds Australia, explains it like this;
Trying to understand financial markets by tracking the daily media headlines is like trying to tell the time by tracking the second hand of a watch. By focusing on the minutiae, you risk missing the big picture.
On top of all this, it had been run by the Queensland government and historically, governments don’t run businesses with the goal of maximising profits.
Almost without exception, the press published negative reports about the company and its future. Some Investment Banks and broking houses joined the band wagon, although it must be said there may have been some sour grapes as many of them missed out on being involved in the float.
Jim Parker again;
Much of the investment-related news that fills the vast gaps between the advertisements in the day-by-day world of the media is undoubtedly fascinating, particularly to those who live their lives that way. But a lot of it really is a distraction for those who want to build long-term wealth through investment. That’s because while the news story keeps changing according to the events of the hour or the day, the story of sound investment doesn’t change much at all.
So how has Queensland rail faired since their listing on 22 November 2010 amid the barrage of negative press? Retail investors picked up the stock at $2.45. Institutional investors paid $2.55. Currently QRN is trading at $3.52. That is a 40% premium to the listing price for mum and dad investors.
And what about the fund managers who weren’t interested in QRN last year? Well, a lot of them have since had to purchase the stock as it was included in ASX indices. And these ‘experts’ paid 30 or 40 cents more than the mums and dads.
So what is the moral to this story? Don’t believe everything you read in the papers. You can easily be distracted by short term events and end up throwing away good long term investments or purchasing junk. Do your research, ask your broker or adviser plenty of questions and invest in good companies with good prospects. You will make money in the long term.
Disclaimer: the author works for Wilson HTM, one of the investment managers involved in the QRN listing. Wilson HTM rated the stock a BUY from day one. He has a lot of happy clients.
Image: Salvatore Vuono / FreeDigitalPhotos.net
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