It’s never fun to be the bearer of bad news… especially when you’re running a public company. Today I want to share a “crisis investing” tip that’s wrapped around a personally horrific story.
A CEO never has to defend their company when the stock price is going up.
It’s only after investors are bailing on the stock that you have to get your PR department to stop the bleeding.
And of course, when you come out and announce that the company is doing great and that there are no problems…
The stock drops even further, because you’ve now put blood in the water. You’ve shown weakness, and that momentum can build on itself.
In the corporate world, there’s only one signal I look for to tell me that the bleeding is done and that a profitable investment is setting up.
I’ll get to that in a moment, but first I want to share a nightmare I had to go through with delivering bad news.
Because these corporate guys think they got it bad, but it could be so much worse.
About 20 years ago, I was the president of a fraternity at a large college campus.
The major fall event was homecoming, and we would pair up with a sorority for a week of partying and competing with other organizations for some trophy that doesn’t matter anymore.
Matching up with a sorority was very political. I’m talking “palace intrigue at Versailles” political.
You would compete with other frats to get the sorority you wanted.
There was spying, bribing, and deal making going on underneath the surface.
And that’s where I got in trouble.
We decided to “one-off” a sorority, which meant you went all in on getting a deal done with only a single group.
Which meant you ignored all the others.
Folks, don’t blanket reject a group of 150 women. It might come back to bite you.
This was a high-risk move, and high-stress.
And for a college kid, it’s high stakes! We’re not in the real world yet so we’re all taking this entirely too seriously.
Another fraternity also pulled a “one-off” for the same sorority, and we ended up losing.
Because we still needed to pair up with a sorority.
My spies told me another sorority would be willing to consider it… if we begged.
So now I’m not only having bad news rain down on me — I have to go in front of a young women’s organization and explain to them why we thought they were second best.
I walked over with 8 of my brothers who were all dating someone at that sorority.
We brought over flowers that we had planned on bringing to the other sorority when they said yes.
And I went through those double doors, and it was dead silent.
Folks, do not ever piss off 150 women at the same time. I had 150 sets of eyes throwing daggers at me, and I had to take every one of them.
It was a struggle session. I apologized, I said the one-off was entirely my idea and that I have brought shame upon myself.
Some form of a deal had been made before I apologized… but I have a feeling they wanted to see us sweat.
That goes for the stock market, too.
When you see a press release come out from a company on a Sunday afternoon, it means you are desperately trying to stem the bleeding.
Your shareholders are staging a revolt, and if it keeps up, the board is going to fire you.
Or, an activist investor comes forward and fires the board and you.
A Sunday press release signals panic, and should be avoided as much as possible.
Let me give you an example.
There’s a logistics company that I’m following, and they announced a merger shortly after their earnings report.
Investors hated the deal. The stock dropped over 30% in two days.
It was so bad that they released an “Investor Q&A” on a Sunday night to try and stem the bleeding.
But it won’t! There’s blood in the water! The stock eventually bottomed out after getting cut in half from its highs.
Buyers showed up, but not because of a Press Release.
There’s only way I know how to quickly stem the tide of selling.
A little more skin in the game.
In other words, they need to buy shares.
And this company did. You had the CEO and 3 other C-suite investors buy some serious size.
8 out of the 11 directors on the board bought thousands of shares.
Now that’s a signal I want to see. Because at nearly 50% off, leadership needs to believe that they are getting the best deal on shares that they’ll see in a decade.
And right now, it feels like it. If the merger truly is accretive like leadership says, and they’ve put their own personal money behind the deal, then this stock is set up to be one of the best investment buys this year.
Now you may be wondering why I’m following a little-known logistics company.
And the truth is, I wasn’t.
It was the share buys from company leadership that provided the investment idea.
It is the best way to find profit-rich, opportunistic setups in stocks without a ton of risk and guesswork.
I’ve put together a free training that shows, step-by-step, how to find opportunities like this one.