When a Company Just “Feels” Like a Bad Investment

I think one important factor that many people don’t think about when analyzing a company for inclusion into an investment portfolio – dividend or otherwise – is how the company “feels” to you.

What do I mean you ask? If a company has the best fundamentals on the planet – is throwing off cash like crazy, is growing EPS like mad – it still will not make sense to purchase that investment if there is something about the company’s operations or public perception that makes you feel uneasy. You are probably not the only one who thinks like this and I feel it can impact a company’s performance in the long run.

Take for example the Aeroplan Income Fund up here in Canada. Aeroplan is a points collection program, similar to that of Delta or United’s point programs for flying with them. You collect points that can later be redeemed for things like flights and merchandise. The problem is that in Canada, Aeroplan’s reputation is brutal, at least in the circles I hang with. Common complaints such as never being able to use your points because the seats available on points are very limited, the outlandish premiums you pay when you use your points to purchase merchandise, or other things like waiting on hold for an hour just to talk with someone are things I hear over and over again. This type of public perception really makes me think that the prospects for the company are weak, no matter how good things may look right now. It just “feels” bad and to me, that can be more important than what the fundies show you.

So before you drop some investment capital on a company, make sure it just “feels” right in addition to all the other things you look at.

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• When Is a Yield Too High?