There’s money to be made when things are priced inappropriately. Value stock pickers look for discrepancies in the market and then capitalize on them. They do the homework, researching companies or products in a variety of ways. They then formulate opinions as to whether they think the stock is priced fairly. If the going market rate is vastly different from their opinion and their opinion ends up right, ka-ching! If they thought the stock was under priced, they bought it up cheap and held on to it, waiting for the market to figure out what they already knew and push up the price up. Warren Buffet is famous for this approach.
Conversely, if they think the market price is too high for the quality of the stock, even a value investor might take a ‘short’ positions and make money when the market price crashes. A good example is the handful of people who knew the home mortgages in the mortgage-backed securities ( home loans pooled into bonds) were junk, in spite of their high ratings by Moody’s and Standard and Poor’s. How did they know? They did the homework. They poured over reams of data and figured out the home loans behind the bonds were often undocumented (no proof of income, etc) and that a few high credit scores were being used to drive up the average credit score for the pool of loans.They then placed a bet that it would all go horribly wrong in the form of a credit default swap (CDS). My favorite author, Michael Lewis, describes CDS’s like taking out an insurance policy on a house you don’t own that’s already on fire. A company called AIG, whose CEO was notorious for not listing to differing viewpoints, sold those insurance policies to investment banks like Goldman Sachs, Lehman’s etc. Those banks, in addition to taking an unpopular view that mortgage holders across America were abouat to default in droves, also knew the insurance policies/CDS’s were underpriced—that the likely hood of failure was high (remember, the house was already on fire/ defaults had started) yet, the CDS’s were cheap. . When the market crashed AIG couldn’t pay all those investment banks back as they didn’t set aside capital reserves; hence, the government bailout
.So what could this possibly have to do with shopping for skincare? Well, that little rush you get from paying so little for a high quality product—when it almost feels like stealing—that’s the kind of rush value stock pickers get. And, to be successful, you have to keep your ear to the ground and do your homework. Conversely, knowing when something is ridiculously overpriced, when its cost doesn’t justify what’s hidden on the inside (like bad mortgages) you can avoid overspending. In the world of skincare, there’s a lot of what you might think are “Triple A-rated” products, but they’re really just a few active ingredients trying to distract you from low quality fillers, artifical fragrance,aka “junk.” But, it’s complicated, and many people, just like most of Wall Street, can’t be bothered to drill down and investigate.Perhaps you get a newsletter from your investment advisor, financial planner or stock broker. Well, I hope you’ll consider my YogaHotDish Newsletter recommendations the skincare equivalent. I have been doing the homework for over 5 years. After a week glued to my computer and a trip to London to meet the management, I picked Arbonne as a Value Company. As my knowledge grew, I then learned that there were Value Products within the Company. That’s why I’m not big on selling “kits” as I think there are better options if you “trade across markets” or, draw from several of their lines. When I send you a blurb on a product and make a recommendation, consider it like a hot stock tip. Where do I get my information? I check each ingredient. I compare it with the mass market leaders. The products I highlight are those which I feel are much underpriced –that is, those that give you more product and better ingredients for less. BTW, I USE EVERYTHING I RECOMMEND!
I warn you though, Arbonne catches on, so it’s best not to wait too long to make up your mind. For instance, I’ve been recommending their bronzer since Day One. I still remember opening it—largest most gorgous compact I’d ever seen. . I’ve gone through 2 of them in 6 year. Well, guess what? On this last order, the container was smaller, a lot smaller. Why? Because Arbonne figured out it was grossly underpriced. Instead of raising the price, they decreased the amount = same thing. But, like any investment, we had a good run. They’ve also upped the price $2 on their extremely under-priced all-purpose moisturizer from $35 to $37. I am still giving it a “strong buy” recommendation though.
I’ll be including all my “hot stock tips” in the “Savvy Skincare Investor” section of the YogaHotDish Newsletter, so stay tuned and do sign up! Just click on the “Newsletter” tab. Now, off to evaluate some new products and look for the Next Great Thing.
