September 2, 2015
Shock, anger, just plain mad? I felt those feelings too, upon hearing that the Bills had released fan-favorite Fred Jackson on Monday. You'd be hard-pressed to find a more beloved athlete in western New York than Fred Jackson, and many were upset with Bills for cutting a player that meant so much to our area for such a long time. Turns out, we sometimes deal with these scenarios when it comes to investing - allow me a moment to explain.
Consider the facts - Jackson leaves Buffalo as the third all-time leading running back, behind Thurman Thomas and OJ Simpson - two hall of fame players. He was extremely active in the community - he spent plenty of time in Rochester, too. A family man, At 34 years old, however, he was the oldest running back in the NFL - a position that takes a heavy, heavy physical toll on the body. He did not play special teams (kickoff returns, punt returns, etc). The Bills had other, younger running backs that can do this. Other running backs had been added that were younger, perhaps faster and quicker, and also cheaper. Jackson was scheduled to make over $2 million this season. That money can now be used to re-sign some other big-name players who will need new contracts this year. To make a long story short, for a variety of reasons the Bills didn't feel as if Jackson was the best fit for their team and made a tough decision to move on.
Investing sometimes leads to similar scenarios. I often advise clients that our goal is to own good companies for long periods of time. This can often lead to growth over time, and don't forget the power of dividends, which can provide an increasing stream of cash flow each year. Owning quality companies for a period of time often leads to a sense of loyalty - a desire to purchase products they make (think of buying Hershey's chocolate because you own Hershey shares). However, times change. Our investment objectives often become different; a recent retiree may desire more income as opposed to share growth from their portfolio. Sometimes we remove a company that we've owned because it's no longer the best fit. Maybe performance has started to lag, dividend growth has slowed, or perhaps new management causes us to change our opinions. In some cases, a new opportunity appears - perhaps a company with stronger dividends or prospects for growth, and we take a profit and move on, hopefully with stronger results.
In both cases what remains unseen is what's next - Jackson will likely sign with another team and he could find more success, leaving us Bills fans with an even worse taste in our mouths. Companies that we sell sometimes continue to grow and we think "why did I get rid of that?" In each case, the hope is that through careful analysis and consideration, we make the best decision for our team, or our investment portfolios - in time that may soften the pain of moving on. In any case, I'll miss seeing #22 in a Bills uniform when the season begins on September 13th.
Chuck Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).