Summary:
Yesterday's plunge in the shares on Intel, Ebay, Amazon and other tech stocks in the wake of weaker than expected earnings reports serves as a reminder that buying the shares of well known companies does not protect investors against losses. Non-professional investors tend to buy these well known companies because of their familiarity, yet such stocks are often overpriced because such investors do not discern, or can not discern, when such stocks are pricey. They are being bought largely on the basis of brands recognition. And in this case, paying more for the brand may not provide an investment with a satisfactory return.
Yesterday's plunge in the shares on Intel, Ebay, Amazon and other tech stocks in the wake of weaker than expected earnings reports serves as a reminder that buying the shares of well known companies does not protect investors against losses. Non-professional investors tend to buy these well known companies because of their familiarity, yet such stocks are often overpriced because such investors do not discern, or can not discern, when such stocks are pricey. They are being bought largely on the basis of brands recognition. And in this case, paying more for the brand may not provide an investment with a satisfactory return.
Even the bluest blue chips are unable to sustain strong competitive positions indefinitely. Times change, which may erode or destroy the economic outlook for a business. One-time blue chip companies like Kodak, Xerox, Polaroid,.....
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