Investors Obsess Over the Past: The Case of Microsoft

I was just on Sharebuilder.com, the on-line broker that allows you to invest any sum you want monthly into any stocks you want.

So you can buy $100 of Stock XYZ a month.

It has an interesting feature that shows you which stocks are the ones most invested in by other customers. I’ve talked about this before but thought I’d check it out once again given the apparent “bursting” of the commodities bubble.

As you can guess from the title of this post- one of the most popular stocks that investors are buying right now is Microsoft (MSFT).

This is rather shocking to me, given its recent price history and given all of the other options available.

But it shouldn’t be shocking to me. Why?

BECAUSE INVESTORS ALWAYS OBSESS OVER THE PAST

What was the best performing stock of the 1990s? Microsoft (or one of them anyway.) Eight years after the stock ceased rising 20% or more a year, investors still “hope” that maybe this will be the year it goes up after all.

Check out its chart. In March 2000, it traded at $53 a share. We now know this was the peak of the NASDAQ bubble. It’s currently trading around $28 and has been in a narrow $23 to $38 trading range for awhile.

It’s never again traded as high as $53. Over the last eight years it has done, well, nothing. One day it WILL trade over $53- but why hold out for that day?

But check out the rest of the Top Ten most requested stocks on Sharebuilder:

1. Apple (AAPL)

2. Microsoft (MSFT)

3. General Electric (GE)

4. Google (GOOG)

5. Wal-Mart (WMT)

6. XM Sirrius (SIRI)

7. ExxonMobil (XOM)

8. Disney (DIS)

9. Cisco (CSCO)

10. Starbucks (SBUX)

If you actually held each of these stocks in your portfolio right now, you wouldn’t be doing too well- even though Apple and Google have outperformed.

Wal-Mart just recently hit a new 8 year high, but the stock has been dead money for most of this decade. Cisco is still in the dot-com bust doldrums (much like Microsoft.) Starbucks has lost more than 50% in the last year. XM Sirrius doesn’t even make any money and is trading at less than 5 years ago.

But Wal-Mart and Cisco were both “hot” in the 1990s.

What Commodities Bubble?

Outside of Exxon, no other commodities related company even makes the top ten list. No Potash or Mosaic (fertilizer companies.) No gold or other mining companies.

Sharebuilder actually publishes the Top 100 companies.

Outside of Exxon, the next commodities-related company appears at #52.

Does that sound frothy to you?

Here’s where other commodities related companies ranked:

#52: Chesapeake Energy (CHK)

#58: Petrobras (PBR)

#59: Potash (POT)

#61: ConocoPhillips (COP)

#91: Yamana Gold (AUY)

#94: Freeport McMoran (FCX)

More investors are buying Bank of America (BAC) which has seen its earnings plunge (it’s at #15) than any of these companies above- many of which have seen their earnings soar.

Why?

Living in the past.

Don’t obsess over the returns of the past. It’s hard to do- but you must.

Microsoft is a great company with incredible earnings. But it’s stock has done nothing for nearly a decade. Don’t live off of the memory of the MSFT of old. Live for now.