We here at Anderson Griggs always like to see our beliefs and philosophies reaffirmed within the media. Especially when the underlying meaning of these beliefs goes unnoticed. Last week, an article titled "Despite Risks, Workers Guzzle Company Stock" in the Wall Street Journal quickly drew our attention. It seems many of the large company employees have recently begun purchasing more and more of their own company's stock for their 401(k) plans.
This information has been tracked by Hewitt Associates, a consulting firm. They found that employees invested over $65 million in their company's own shares in the month of January alone. Furthermore, Hewitt Associates noticed that 401(k) participants have only purchased company stock eight months out of the past six years. Five of those eight months occurred since the middle of last year.
The gist of the remainder of the article is reasons why this is wrong or foolish. Under-diversification with reference to Enron and World-Com are one major point made. A behavioral economics professor from the University of California remarked that these investors don't understand what they are buying. However, from our point of view and philosophy they understand exactly what they are doing
The employees who are evidence for this trend work at these places. They have been working there for years and have a good understanding as to the company they work for, and an understanding of the market's price for their company's stock. They are watching their stock's prices drop and drop and drop. But whereas the majority of the world sees the end, what do you think these employees; these "investors" are seeing?
I believe they are seeing the service orders continuing to be phoned in, the parts continuing to be manufactured into goods, and the sales force out on business as usual. They understand their company, and thus they understand and know what it is they are buying or investing in. They are investing in their company which they have faith in, not as a piece of paper represented by market fluctuation, but a company represented by nuts and bolts and people, being offered at the cheapest price they have ever been witness to.
Our number one rule for investing has always been "know what you own". This is the reason we only invest in the best and the biggest blue chip companies out there. It gives our investors a reason to be invested. Our evidence is not some abstract math equation, but rather aisles of product in stores we all shop at, or fleets of service trucks that pass us every day. This is the reason we post the list of companies we invest in directly on our website. We, like these 401(k) investors know exactly what we own. Do you?
Anderson Griggs & Company, Inc., doing business as Anderson Griggs Portfolio Management is a registered investment adviser with the US Securities & Exchange Commission. Pursuant to laws and regulations Anderson Griggs also maintains notice filing with several individuals state regulators including North and South Carolina. Anderson Griggs only conducts business in states and locations where it is properly registered or meets state requirements for advisors. This commentary is for information purposes only and is not an offer of investment advice. We will only render advice after we deliver our Form ADV Part II to a client in an authorized jurisdiction and receive a properly executed investment Management Agreement. Any reference to performance is historical in nature and no assumption about future performance should be made based on the past performance of any Anderson Griggs Investment Objective, individual account, or index. The authors of publication are expressing general opinions and commentary. They are not attempting to provide legal, accounting, or specific advice to any individual concerning their personal situation. Anderson Griggs Portfolio Management's office is located at 113 E. Main St., Suite 310, Rock Hill, SC 29730. The local phone number is 803-324-5044 and nationally can be reached via its toll-free number 800-254-0874.