Why being an optimistic investor can pay big dividends

If your portfolio is skewed towards growing companies like mine, it may feel that no matter which way you turn a commentator is predicting the imminent collapse of each and every company you own.

To be honest it is easy to fall in line and give up. Just sell your holdings, end the pain and wait until the “experts” tell you it is safe to venture back into the water.

No doubt some pessimistic views are well-founded, sounding particularly convincing; however as I have discussed here, we are all genetically programmed to be twice as sensitive to losing money as we are to making it.

An interesting study found that when a book critic gave a negative review, they were seen to be smarter when compared to a critic who wrote a positive review about the exact same book.

Harvard Professor Teresa Amabile summed up the findings in this way:

Pessimism sounds profound, optimism sounds superficial.”

As if a genetic predisposition wasn’t enough to deal with, the advent of a 24-hour news cycle means investors are constantly bombarded with a tide of negativity.

While it is easier to float with the tide, adopting a negative attitude means you may well miss out on some life changing opportunities. Below are three growing companies which I believe have been a victim of market negativity and I remain very optimistic about the underlying businesses.

Domino’s Pizza Enterprises Ltd. (ASX: DMP)

After hitting an all-time high of $80.69 in August, Domino’s has fallen over 20% in price despite issuing strong guidance of+30% EBITDA growth for the 2017 Financial Year.

Webjet Limited (ASX: WEB)

Despite releasing what can only be described as outstanding guidance for 2017 of EBITDA growth of over 60%, Webjet’s price remains 20% below all-time highs set in October.

Nick Scali Limited (ASX: NCK)

While this company has only fallen around 5% from all-time highs, patient investors may be rewarded by placing Nick Scali on their watch list and crossing their fingers that the negativity around growth stocks remains for a little longer. While I already own Nick Scali, I would be keen to add more around the $5 mark, after yet another guidance upgrade by the company in November.

If dividends are more your style, I suggest checking out Andrew Page’s #1 dividend stock for 2017.


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Motley Fool contributor Alan Edmunds owns shares of Domino's Pizza Enterprises Limited, Nick Scali Limited, and Webjet Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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