Twice a year, my neighborhood holds a yard sale. It’s well advertised, so people come from all over town to hunt for trinkets and treasures. The buyers arrive with a plan and a purpose.
The people who visit our neighborhood are seasoned yard sale shoppers. Arriving in trucks with trailers, they scour our streets looking for bargains. Most were looking for clothes or small household items. I had several drive buys, but nothing the shoppers wanted. I guess they didn’t need tennis rackets or baseball mitts.
One shopper had a trailer full of used equipment like bikes and lawnmowers. The items he found needed repair, and I’m sure he’ll fix them up to resale them at a higher price. His specialty appeared to be items that were broken or needed a little TLC. One man’s trash is another man’s treasure.
In addition to being value shoppers, the buyers haggled for lower prices. If it cost $10, they’d offer $5. If the seller didn’t budge, the buyer moved on to another house. They’re patient and shrewd buyers.
Now and then, a buyer finds a rare gem. One man found an original signed copy of Ernest’s Hemingway’s The Old Man and The Sea. He purchased the book for $2, and it’s probably worth more than $30,000. A buyer in Fresno, California bought a box of photo negatives for $45 and later found out they belonged to Ansel Adams. The images are worth more than $1.8 million. An Arizona buyer found a Jackson Pollack painting worth more than $5 million. It pays to hunt for a bargain.
Investors can learn much from weekend yard sale shoppers like focusing on value, being patient, and having a plan. Patient investors can take advantage of market drops to find companies in the bargain bin. When stock prices drop, most investors tend to look the other way. Not so with value investors. If a company has issues, value hunters know they’re going to get a reasonable price. Sellers, on the other hand, are liquidating because of fear. For example, Kraft Heinz, Nordstrom, Walgreen’s, 3M, Pfizer, and Schwab are all down more than 10% this year, and investors don’t appear interested in these blue chips. It’s unlikely these companies will stay down forever, so at some point value investors will swoop in and start buying.
As we approach the end of the year, look for investments that are down and out that may rebound in a year or two. If you currently own poor-performing investments, be patient.
To improve your investment results, consider a financial plan. A well-constructed financial plan will help you identify and quantify your financial goals. A Certified Financial Planner® will use your financial plan to assist you with managing your debt, taxes, investments, retirement, education, philanthropic and estate planning needs.
“I am sending you out like sheep among wolves. Therefore, be as shrewd as snakes and as innocent as doves.” ~ Matthew 10:6.
October 9, 2019
Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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