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Bill Poulos On Why The Media And The Latest Sensational News Regarding Corporations Is Not A Good Way To Make Investment Decisions

Summary

The government investigation into Facebook had a minimal impact on the company.

When a company is in duress their stock usually falls.

This is usually a good time to buy because you can assume the stock will recover.

Bill Poulos is an experienced investor and published author. In 2001, Bill cofounded Profits Run, Inc. with his son Greg. Poulos regularly offers his thoughts on various finance and life topics on his personal website, billpoulos.com. He grew up in Michigan and still resides there with his wife, Karen. Bill Poulos holds an MBA with a major in finance as well as a bachelor’s degree in engineering.

The government’s investigating Facebook’s activities around the election issue, is the just the beginning, and we will see more and more of as the government try to keep up with rapidly technological advances. Specifically, we will see more government investigations into things related to the data usage, the internet, cryptocurrencies, etc.

Of course, data security is important, and the government should do whatever it can to do to ensure the data security. But, certain government officials may have used their concern for breaches of data and supposed political misuse of data as a ruse. however, these types of investigations will go on and on as time goes forward.

The government investigation into Facebook will have a minimal impact on the company. Facebook just announced better than expected earnings and will work through this and be just fine. Surely, there will be other investigations regarding Facebook down the road, but Facebook will continue to expand and will continue to grow. The Facebook stock, in the long run, could be a good long-term hold.

If anything, when these things occur, the market may sell off stock for the company that’s involved in the investigation or bad press. When people sell off their stock in a company, this often provides a good buying opportunity.

Another recent example of government investigations and media hype affecting a stock price is with the investigation of Wells Fargo. About a year ago, Wells Fargo was accused of fabricating new customer accounts to generate commissions for Wells Fargo employees. While the investigation was going on, Wells Fargo stock did indeed drop, and the allegations were proven to be true, and Wells Fargo was penalized for their indiscretions.

However, Wells Fargo is a large and strong and powerful bank. It will continue to be strong and powerful — even after the investigation, negative media coverage, and stock getting hammered, this proved to be a great buying opportunity for investors willing to buy Wells Fargo stock.

Another example is the British Petroleum (NYSE:BP) oil spill in the Gulf. That was a true disaster. BP owned up to their errors and safety issues, and duly paid the fines that were imposed upon them, including the tremendous cost of cleanup and bearing the cost of corrective actions so this wouldn’t happen again.

All during this episode, analysts thought BP may never be able to recover. In fact, some thought that this could be the end of BP as we had known it. Well, all that was nonsense. And again, it was a great time to buy stock. BP’s stock fell because it was under duress. The talking heads in the media talked the stock down creating a great buying opportunity. Today, BP is doing just fine.