Beware the CEO’s Pitch

Basing investment decisions on conversations with company executives has hurt my returns.

The legendary investor Jim Rogers once observed: “If you’re seated on a plane next to the CEO of a public company, beware. Buy his stock and you’ll lose 50% of your money. Sit next to the chairman and you’ll lose 100%.” The message is clear. Top executives tend to be wildly bullish about their companies’ prospects -- regardless of the facts. “They’re professional salesmen,” says one well-known money manager.

Such inveterate optimism may help executives do their jobs. After all, how can you invest $500 million in a new plant if you really think the sky is falling? But it raises a serious question: Should an investor ever listen to these people?

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Andrew Feinberg
Contributing Columnist, Kiplinger's Personal Finance
Feinberg manages a New York City-based hedge fund called CJA Partners.