One of the problems that investors face is finding companies at a good price and with a solid business to invest in. To do this, some savers rely on financial means as the main source of ideas in which to invest, trusting them blindly. To show you the dangers of this practice, I will show you the questionable reliability of financial means through two examples of ruinous recommendations from Fortune magazine and El Economista.
Fortune magazine's 10 ruinous stock recommendations to keep for a decade
The most famous example of catastrophic recommendations is possibly the one that Fortune magazine gave its readers on August 14, 2000 in the article called “
In short, if the editors of Fortune magazine had chosen the 10 worst companies to invest in, they could hardly have done better.
SOS Cuétara, a conservative and juicy investment, according to El Economista
The disastrous recommendations don't just come from international media. The economist newspaper recommended on June 10, 2.008 in its article “intrinsic value, as any novice value investor you would be able to see simply with a basic analysis of your annual accounts. In fact, I myself warned on my blog "Buffett's smile" in Rankia of the dangers of this supposedly conservative investment in the article Mr. Market put SOS Cuétara on its site, making people who bought shares in this company looking for "a conservative and juicy investment", paying attention to the newspaper El Economista, to lose more than 95% of their investment, going from more than € 14 at the time of the purchase recommendation at less than € 0,5 current. In this graph you can see the result:
Should we discard the recommendations of the financial media?
Not at all, but we must always act with great caution. Financial means can be one more source of investment ideas to consider. What we must look at is not what stocks they recommend buying, but what we must analyze is whether there is a solid argument behind each recommendation that comes to us through financial means.
What is it that we should never do? We should not blindly trust the recommendations of financial magazines and buy stocks based solely on them. As with the rest of the recommendations, we must analyze each company ourselves and make the decision about whether or not it is worth investing if we do not want to be as upset as the savers who followed the ruinous recommendations that we have just seen.