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Stock Doppelgangers: Proceed With Caution

MILLBURN, N.J. (Stockpickr) -- Your doppelganger is a person who looks just like you. In some cultures, there is lore of the doppelganger being an evil person or a ghost who haunts a living person.

In the world of investing, we also have doppelgangers: companies with names that sound or look alike and are easily confused. Investing in a doppelganger stock has risks -- the most notable of which is that you wind up investing in the wrong stock, which may have a totally different risk profile and investment outlook from the stock you intended to invest in. You might wind up compounding your mistake by having to unwind the wrong transaction. By that time, the investment or trade opportunity may have dissipated.

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Of course, there are ways to avoid such doppelganger investments. The first is to make sure that you equate the company you desire to invest in with the correct stock symbol. Furthermore, check to see that the company description and industry classification match those of your intended stock investment. For example, if you intend to buy a tech stock but actually bought a retailer, you have a problem. Also, dividends may provide a clue in differentiating a target stock from its doppelganger.

So let's look at some common investing doppelganger pairs.

The first one that comes to mind is Cisco (CSCO) and Sysco (SYY). Cisco is a technology company that makes networking, security, telecommunications and video set-top box equipment. Sysco is a food service company that supplies prepared, fresh and frozen food as well as supplies to restaurants, hotels, medical facilities and educational institutions.

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You could not get two companies more at polar opposites than Cisco and Sysco. Cisco is a growth technology company that up until a recent announcement has never paid a dividend to shareholders. Sysco is a company that vends consumer staples and pays a dividend of 3.5%, a payout that I would note is above the market average. However, the two stocks are pronounced the same way, and each has a five-letter name with three identical letters at the end.

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