Best Performance Not Always Most Hyped

This weekend we had two great football games with the AFC and NFC Championships on the line. Both games were expected to be great contests, but one game was hyped up much more than the other. With two of the greatest quarterbacks to ever play the game (Tom Brady and Peyton Manning) competing on the same field for such an important game, the AFC Championship was built up to be a game for the ages.

While the San Francisco-vs-Seattle game was expected to be a great game as well, all the talk was about the Denver-vs-New England game. Both games were great to watch, but one game was a much more competitive game than the other. As fate would have it, the less hyped game was the better game. I couldn’t help but think, “That’s how a lot of hyped investment opportunities go.” So many investors are looking for the next hot stock or investment idea that will make them rich overnight. While some of these do live up to the hype, more often than not they far underperform those who are less hyped, but have solid fundamentals.

I often tell people to stay away from hot IPO’s if they cannot get shares through their brokerage firm allocated at the actual IPO price, because the hype will usually drive the price to irrational valuations, and then the stock will fall, giving those who waited an opportunity to purchase it at a much cheaper price. This is not to say that some of the hot IPO’s like Facebook, Twitter, Linked In, and Visa to name a few, will not be great investments. In fact all of them are much higher today than where they were when they had their Initial Public Offerings. My point here is that when there is so much hype surrounding one thing, the greater immediate opportunity usually lies elsewhere.

There are few times in life where anything lives up to or exceeds the hype. While both the AFC and NFC games Sunday were good, the less hyped game was the one that had people on the edge of their seats until the last twenty-two seconds of the game, when Richard Sherman made an amazing play on a pass meant for Michael Crabtree, tipping the ball to his teammate for an interception in the end zone and securing the Seahawks’ spot in the Super Bowl.

Remember this next time you are tempted by to chase the next big hyped IPO. Sometimes, if not most of the time, it makes sense to look elsewhere and wait until the hype dies down, so you can pick it up at a cheaper price.