Finance, Investing

Do you ever just go with your gut feeling on a stock pick?

Stock picking by your gut

Watching the grass grow

I enjoy most of the financial blogs that I follow. However, I must say, most of their advice centers around the basic “Buy Low and Sell high” theory.

Actually, it’s even worse than that.  I call it the “No brainer path to becoming a millionaire”. Cut your expenses to the bone and use index funds to slowly capture gains over time.  Nothing sexy about that. It’s really about delayed gratification. In general, it’s a smart move for most people.

However, my biggest individual gains over the years have come from picking individual stocks.  Not sitting and watching my money grow.

Don’t get me wrong, I don’t always win, as I illustrated in this post about how I lost $5,000 in my early investing career.  However, these types of lessons have helped me identify when I’m willing to take on a little more risk in return for a potentially bigger reward.

Who can you trust?

In general, the reporting guidelines for companies are very lax.  A recent post on Marketwatch shows how companies can use fuzzy math to lure in investors.

So who can you trust?

Sometimes the answer to that question MUST be yourself.

Today, I picked up 400 shares of Zoes kitchen (ZOES) at around 11.30 per share.  Even though I’m in the hole this year on this stock.  The last time I sold some shares, was at around $18, about 6 months ago. A big drop for sure, but I think dollar cost averaging back into a larger position works for me at this time.

As detailed in this NYTimes article there might be too many restaurants. For sure the restaurant industry has really been under pressure this year, but I’m counting on a comeback. I’ve been following Zoe’s kitchen for about 2 years now, and was hoping it would be a first mover in the changing tastes of America.  Namely, the focus on a healthier Mediterranean menu.   While there are no locations in my immediate area, I did a 90 mile drive, 10 months ago, to do some research.  I was impressed with the quality and the customer service.  However, I was underwhelmed by social media marketing strategy and their delayed app roll out.

When do you pull the trigger?

After watching the stock get punished this week, for no apparent reason, I decided to pick up some more shares today.  I’ve started to see an increase in their direct email campaign, their offers, and a total redesign of their website.

I’m a firm believer in the power of the internet, now more than ever, to make a real difference in sales.  Three years ago, I had even done a post about how Starbucks’ app, turned me from a non-customer, into a customer, with their rewards star program.

When I did a general search for Zoes locations on their website, many more locations are creeping into the big market areas where they had been lacking. Where there used to be only 1 or 2 locations, now there are 10.  The website is highly responsive and their email marketing is on point.  They email marketing campaigns feature a lot more freebies and promotions. They’ve also started to promote their rewards program on their app along with working out many of the bugs that previously plagued the app.  Their most recent earnings were within estimated ranges.

Zoes Kitchen Map

While any individual point, doesn’t portend great things around the corner.  Taken together, it does signal to me, that I’m willing to take on a little more risk, for a big reward.

Zoes Email campaign
Subject lines of most recent email campaign promotions.

Who knows how it will all turn out in the end, but sometimes you need to go with you gut instead of watching paint dry.

 

DISCLAIMER:  This is not an endorsement of any particular stock or investment strategy.  This is my own individual opinion.