INVESTING: Quality firms not always a good place to invest

Let’s play a game. I am going to write the name of a company, and I want you to say what immediately comes to your mind. I am not looking for your feelings about the stock price, but rather what you think about the company itself. As an example, let’s look at Wal-Mart. The stock has been a dog for 10 years and probably will keep dogging it for years to come. But the company is amazing in its ability to keep serving its core customers, a base that seems to be growing all the time.

OK, let’s get started. Apple Computer. My first thought is, this company can do no wrong. Steve Jobs has been innovating for decades, and I am stunned when I think about the level of excellence he still is performing at. In a few short years, those little white ear buds have become more common around the world than a Coke billboard. I would be surprised if more than one out of 10 people has a different reaction than that.

Now, how about Google? I seem to use more and more of its products every day. A lot of companies talk about helping improve productivity, but Google actually does it. It is a useful little engine.

Let’s go away from technology and over to food. McDonald’s completely has rejuvenated itself in the last few years. The falling dollar has played right to its strengths, and now it is about to take a lot of share from Starbucks in the coffee world. It has been impressive to watch.

One more. General Motors. I know, not a real warm-and-fuzzy feeling right? People have been talking about bankruptcy for this company for the last 10 years, and I agree. I don’t see how the company will get through the remainder of this decade.

Well, here comes the kicker. What if I told you that on Dec. 27, 2007, Apple hit a multi-year high of $203, and that perhaps it’s the highest price the stock ever will reach? I know, you’re thinking I’m nuts, but it’s possible. I think Google’s stock could be in even worse shape. After hitting almost $750 a share in early November, the stock seems destined to work steadily lower for the next several years. McDonald’s seemed to be on top of the world only a few weeks ago, until it fell 16 percent in a month! As for GM, even the guy from “National Treasure” would struggle to find an uptick in this stock the past three months.

A couple of useful things can be picked up from this game. The first is that companies and stocks are different, and if you want success in the stock market you have to treat them as such.

The next is that when everything seems to be going great, that’s the time you should be looking to sell a stock. Intel, which in my opinion is one of the best-run companies in the world, saw its stock hit $75 a share in 2000. It’s now around $20. Will the stock ever see $75 again? Perhaps, but it might need a few decades.

When the news is positive, as it is now with Apple, it’s hard to see trouble. But look at Intel over the last eight years. We still are early in this bear market I’ve been warning about the last few months. Be careful.