Is Not Using The Product Reason Not To Own The Stock?

by: Joe Albano


Time and again I see investors and colleagues writing and talking about not owning stock in a company simply because they don't use or own the product.

If this is their final reason for not investing in a company I believe they are making a serious mistake and are using an emotional excuse to deny themselves profits.

There are plenty of companies whose products you may not use or agree with but are growing fast and are highly profitable. Why challenge the majority opinion?

Living in a highly connected, technical world means we have the ability to buy a product and have it in our hands literally overnight. Amazon (NASDAQ:AMZN) has taken control on this front and it doesn't take but a small fee to indulge in an unlimited capacity. Other products' reach are even easier in that it's only a matter of signing up to use them. Of course I'm talking about social media apps like Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), or Snapchat (Private:CHAT) but this can extend to any Web 2.0 website or app which provides a service.

There of course is more to this since not everyone has an Amazon Prime account or a Twitter account. Even further, there are likely less people in this focus group as we build out subsets that are combinations of any of the above (and more) or even all of them.

I can't talk to someone about their Amazon Prime experience if they've never signed up for the trial. Likewise, I can't give someone my experience with Snapchat as I don't use the app. If I did, I'd be quite the liar (or accidentally the inventor of the next idea).

I, personally, have an Amazon Prime account but don't have a Facebook account. In fact, I "deleted" my Facebook profile over two and half years ago. At the same time, it's no secret I hold stock in this very same company.

Most investors wouldn't pass judgment about using a product but not owning the stock. Many of us follow this philosophy just because we don't have unlimited funds to put towards every company whose products we use. Or, is it really because we know a product could be good but the company or stock not?

If that's so, does the reverse hold true? Should you not own stock in a company whose product you don't use? I think that's silly.

While I believe one should understand what they are investing in, both the product and the company alike, I don't think it's necessary to possess or use the product to pull the trigger. If the product is doing well and the company is subsequently doing well then what difference does it make if you use it or not?

Most investors don't think twice about investing in cigarette companies but yet, like myself, have never touched a cigarette in their life. If the company's income and - if applicable - dividends are doing well and growing then I certainly don't have to light one up in order to put my portfolio in that direction.

Going back to my Facebook example, should I have sold when I deleted my account? If I did I would have only made a 16% profit. Instead I've continued to hold Facebook and currently have a 180% paper profit. Without my Facebook account I garnered an additional 160% gain. What I'm saying is the profits to be made are real whether you use the product or not.

Personally, I think it's a poor excuse not to invest in something simply because you either don't use the company's product often or because you've never signed up for it. It's one thing if you want to research and mess with the product to get an understanding for what the company does but it's another thing if you say its crap and won't invest in it based on that principle.

This backwards thinking is really no different than emotional investing. Sure, it's difficult to separate emotion from finances and more so with a stock you love or hate (see what I did there?) but that shouldn't get in the way of you profiting from what the majority of users or clients are saying with their wallet.

This is all a pretty simple thought but the reason why I bring it up is I see time and again people commenting about how they don't own a stock because they either don't use it often, never have used it, or simply think the product is a waste of time or is garbage. Investing is not about your personal opinion of the product; it's about how the product does on the market, how the company profits from that product and if the long-term viability of that product holds up and/or leads to other viable products.

Your use or opinion of the product is typically not a majority opinion if the company continues to thrive. I use Facebook again as an example because many investors see it as a waste of time. That's perfectly fine, I tend to agree actually. The problem is when this gets in the way of profiting from the other people who don't care about wasting their time which allows eyes to be used for advertiser's purposes. Basically, why fight the wave when its profitable?

My closing example is a personal one. I don't use Apple (NASDAQ:AAPL) products. The only Apple product I owned was given to me as a gift back when iPods were in. I have never spent money on a physical Apple product (I've bought songs from iTunes when I had the gifted iPod) and furthermore I don't care for them for many reasons. Now, even though I might have a disdain for the product I could consider investing in Apple if I think the valuation is right, the company is continuing to grow and I know profits are possible with my investment. But I'll be honest, it's not easy separating my product philosophy with my investment analysis but if I want to make profits I must.

It would be a wise thing for investors of any type and any age to remove their product opinion as a driving, emotional force in their investment and look at how it does from a majority standpoint. Only then can you look at the company more objectively to determine if the product is being profitable and if there is a long-term horizon for it or related products. It's not about your personal opinion of the product but rather your research of how the product performs and creates profits today and in the future.

Why let your personal product opinions stand in the way of financial success? Invest in what is working and profitable not necessarily what you think is a good or bad product.

Disclosure: I am/we are long FB.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.