Sell the Love. Buy the Hate.
I bet you remember this event clearly...
On March 24, 1989, the Exxon Valdez oil tanker struck a reef in Prince William Sound, Alaska.
The accident let loose nearly 11 million gallons of crude oil into the ocean waters.
The spill is considered one of the worst man-made environmental disasters history. And for Exxon, the event was a PR nightmare.
Protests erupted around the country as the nightly news showed images of oil-covered animals. Politicians, lawmakers, community leaders, and environmental groups almost immediately began urging consumers to boycott Exxon products.
Senator Michael Meotti (D) said at the time, “Many people are outraged and frustrated over this incident. This is an opportunity for everyone, as consumers in the free marketplace, to make a point to Exxon.”
People gathered in Anchorage, Alaska, to protest Exxon (May 1989)
Around 200 people at Fiesta Island in San Diego to protest the use of Exxon products (July 1989)
Following the spill, share prices of Exxon immediately dipped on heavy selling amid fears the boycotts would affect sales. And for a short time, some people did in fact avoid buying from Exxon.
But here’s a question for you: Does anyone still care about the Valdez oil spill today?
Is there anyone out there (in sound mind) who is still boycotting Exxon today because of the Valdez spill?
Or did the market mostly forget about the incident... which, again, was one of the worst man-made environmental disasters in history?
The question is obviously rhetorical. No one cares or remembers anymore.
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And Exxon has recovered, with revenue soaring since that time. Hell, at one point it was even the largest company in the world by market cap.
What does this tell us?
It’s simple: People are often upset with a company or organization for short while. But eventually they forget and move on.
And in the meantime, while the public is upset and driving down share prices, there is a buying opportunity. Take a look at Exxon’s share price since 1989:
In 30 years, shares of XOM have increase nearly 650%. One of the worst man-made environmental disasters in history couldn't kill the stock.
Warren Buffett once famously said, “Be fearful when others are greedy. Be greedy when others are fearful.”
But I want to put a spin on that: Be fearful when others love a company. Be greedy when others hate a company.
Sell the Love. Buy the Hate.
Right now there are several companies dealing with public relations issues. One that comes to mind is Papa John's.
Papa John's founder John Schnatter recently used a racial slur during a conference call and is now dealing with the fallout. Numerous sports teams, organizations, and individuals are boycotting Papa John's. And shares have taken a hit.
But let me ask you: How long will people remember this event?
Again, the question is rhetorical.
After the headlines blow over, people will forget, and it will be back to business for Papa John’s.
People are quite forgetful when it comes to headlines. Another great example is Nestle.
Nestle has one of the worst corporate histories, yet most people have long forgotten about them all. Nestle has been accused of antitrust violations, child labor, slave labor, deforestation, etc. The company even helped with the financing of the Nazi party in Switzerland in 1939. Today, it's the world's largest food and beverage company.
Public relations disasters pulling down share prices can be great buying opportunities. Don't follow the crowd. Keep your mind on the long term.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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