In the spirit of full disclosure, I'm neither a stock analyst nor a financial adviser. But given the inexplicable ups and downs of the market, that may make me more credible than those who have been touting their credentials and experience in the market but still have made poor calls.
It's commonly accepted that investors' concerns about the economy are based on: GDP, interest rates, inflation, unemployment, crude oil, trade, the auto industry, the retail industry, real estate, regulation, global events, etc.
Meanwhile, individual company C-Suite concerns include health care costs, fuel costs, federal regulations, credit availability and rates, consumer demand, staffing, supply chain risk, working capital, forecasting, competitive pricing, innovation, etc.
Do you see anything missing in these lists? Well, I ask, "What about
Confidence is woefully absent in all the conversations on Wall Street, Main Street and K Street. But confidence is the fuel that powers the engine of commerce. It is a tangible intangible, bringing to mind the famous statement from Supreme Court Justice Potter Stewart about pornography: "I shall not today attempt further to define the kinds of material I understand to be embraced ... but I know it when I see it."
Although it may be hard to define, everyone intuitively understands confidence -- unlike arcane exotic financial instruments and complex accounting innovations.
But what inspires confidence among a company's investors and employees? Ethical conduct. Pursuing profits without principles may pay off in the short term, but in the long term it's a perilous path.
In order to have confidence in a company, you need to research its leadership, values, practices and reputation.
Here are some of the questions you need to ask:
Are there any pending lawsuits?
Are there any pending product recalls?
Is there negative press on the company?
What is the stability of the management?
How has the company responded to real or perceived negative events?
What is the company's standing
vis a vis
its competition in terms of reputation and regard?
Is the company known for innovation or stability?
Is the company known for aggressive growth or sustained/managed growth?
If the company's workers are members of union(s), is the relationship between the company and the union(s) healthy or destructive?
Although any company at any time can appear to be a winner on all fronts, don't make a significant investment in any stock without first doing your own homework. Don't rely solely on an investment adviser's opinion. A little time performing Internet searches on the aforementioned questions could reveal insights into a risky business or at least a trend toward suspect management.
Remember Enron? It was one of the darlings of Wall Street and was well known in the Texas philanthropic community. But its executives went from being celebrated as top performers to being vilified as corrupt fraudsters. How about WorldCom,
, Adelphia? These were all seen as very solid -- even iconic -- companies in their respective sectors. Their troubles were artfully and scientifically concealed.
There's more to a company's worthiness of your dollars than a price-to-earnings ratio.
Given the number of "invincible" giants that have fallen in recent years,
means more today than ever before. Take a close look at what's happening inside a company before you sign your check.
Vince Crew, is founder of REACH Development Services (www.REACHdevelopment.com). He has more than 30 years of Communications and Ethics experience and holds a master of science degree in marketing and communication, with an emphasis on "Leadership and Ethical Decision Making During the Lifecycle of an Organization." Vince is a national media expert on business innovation, strategic growth and leadership. He has been interviewed by Entrepreneur magazine, Fox Business Network, CNN, CNBC and more. Crew is the author of four books, including his latest, Everyday Ethics, Everlasting Consequences.