This week I’m buying Saint Gobain, a stock that my video editor Milos has chosen for me. Generally, Saint Gobain is a red flag for me. The French conglomerate wants to buy the fantastic Swiss company Sika - a long-time customer of my company.
Personally, I think that's wrong; and not just because of how it went down. The purchase might still be within Swiss jurisdiction, but it is simply ruthless.
Above all, I think that it’s wrong because these mega-mergers destroy assets, as employees of a different cement company have already admitted to me – obviously, in private.
An exciting case, then: The gut says no, the ranks say yes. What should we do there? In love, you should pay attention to your feelings, but when it comes to stocks, you should follow your head.
Why is that? Our gut instincts are betraying us when it comes to stocks: first, our emotions are overshadowed by events that are already included in the stock price. Why is Saint Gobain so cheap? Maybe because they’re making a mistake with Sika.
But even worse is the second reason: we are blinded by the past. We like to buy stocks when everyone is raving about them. But that’s not when you should buy the stocks, because if everyone talks them up, then they are expensive.
And what will happen at Saint Gobain? Maybe the Sika management will eventually even take the lead at Saint Gobain, as happened to SBG and the Swiss Bank Corporation. That could even be a good sign.