COMMENTARY | COLUMNISTS | BRENT WILSEY

Don't let fear motivate investment decisions

Well, 2012 is now in the record books. We went through quite a bit from Jan. 13, when rating agencies downgraded nine eurozone nations, to the problematic IPO of Facebook in May, then Superstorm Sandy in October and ending the year with the fear of falling off the "fiscal cliff."

Much of this kept investors on the sidelines, either waiting for a big pullback to buy into the market or simply frozen like a deer in the headlights.

For many years, I have tried to explain that fear is the greatest enemy when it comes to investing, and the only resolution to that fear is to understand it will be there, and that you should research and deeply understand the valuations and the businesses that you invest in. And if you can’t overcome that, or don't have time to do the real research, find a money manager who does and hand over the reins.

This is not easy for people, because fear is a much greater emotion than joy. When you’re scared of investing, the fear is probably twice as powerful as a feeling of happiness.

Think about 2012 — there were a lot of things to feel bad about, but it was hard to think of something correspondingly good. So, when you watch all the news, you become scared and react more negatively to the news and either sell or remain on the sidelines in money markets, CDs or other “safe” instruments that prevent you from earning any type of real return on your money.

In 2012 the S&P 500 returned 13.4 percent, the Nasdaq climbed 15.9 percent, and the Dow managed to increase 7.3 percent.

Be honest with yourself — did you really think we would have those kinds of returns in the markets in January 2012? If you're honest with yourself, I think most will say no.

The new year will hold a whole new bag of things to worry about. Some we know, like the debt ceiling. Others will be sprung upon us and raise emotions to levels that once again scare you. Please notice how I said "you," and not "us" or "me," because while I will be aware of the same things you are, I look at things from a different perspective.

Yes, I understand that in the short term these may cause the stock prices to decline on some of my companies we hold in our portfolio. But I also understand that the businesses we hold in our portfolio are currently undervalued and the company’s products will still be purchased the next day, whether it is a toothbrush or an iPhone.

Throughout 2013 I will be here, taking your requests for companies to write about along with my radio program on Saturday at 8 a.m. on AM760 and many other appearances on TV, print and radio, helping you through what will prove to be another trying year on your emotions.

Keep this column handy for when those scary times come up in 2013, and make no mistake, they will come up and try to scare you off track. But if you go back in history, you will find that markets generally do well when they are inexpensive like they are now. Just because the Dow is above 13,000 doesn't mean that it's expensive. You must break that down into the fundamentals of what are the earnings, sales, book value and cash flow for each company. Then, and only then, can one determine the value of each and every company.

Currently I’m buying companies in our portfolio for eight to 10 times forward earnings — those are good buys.

I’m looking forward to 2013, and while we just started the year, I don’t care about what happens tomorrow, next week or next month. I’m now focused on where our $115 million portfolio will be when Dec. 31, 2013, arrives. If you need me, you know how to find me.

Have a question or a company you'd like me to take a look at? Email me at brent@wilseyassetmanagement.com.



Wilsey is president of Wilsey Asset Management and can be heard every Saturday at 8 a.m. on KFMB AM760. Information is provided by Reuters.

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