Sep 24, 2020
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Make Money On Companies That Gouge You

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This article appears in the July 16 2012 issue of Forbes magazine. Once you open your cellphone bill do you end up astonished at how low it is? Once you pull up to a gas pump are you overcome with warm feelings about oil cartels? In case your emotions run in the other direction I have some investment advice

 

Buy into companies you do business with even if—no especially if—you are getting ripped off. Then price hikes won t bother you so much. Follow my advice and you’ll find peace learn how to admire your enemies and do a little asset/liability matching. I was inspired to this type of Zen portfolio management after reading the net spluttering about Lexmark

 

It kind of feels that users of its printers are urged to update their software and after clicking yes get a message from the company along these lines: For your convenience we’ve just touched up a few loose results in your printer s firmware and also disabled competitors ink cartridges

 

Scoundrels! But wait. Isn t it a classic business model to sell razors at bargain prices and then make money at the blades? Lexmark (LXK 26) has simply enhanced this strategy a bit. Sell the razors and then coerce people to purchase the blades. If you own a Lexmark printer don t let your blood pressure go up

 

Instead get at the other side of the table. With a modest 200-share position your piece of the profits should almost cover your ink costs. Peter Lynch maestro of the Fidelity Magellan Fund in its heyday famously said that you should invest in what you know. His wife liked L eggs stockings so he loaded up on shares of Hanes

 

My variation on it’s that you should buy companies you don t like. In the event that they ve got their hands on your pocket put your hand in theirs. PROMOTED Civic Nation BRANDVOICE | Paid Program
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5 Ways Employers Can Support Black Employees: A Young Leader s Advice Have you ever noticed how your health insurer mangles claims? You get rejected for preposterous reasons; then your appeal is met with non sequiturs and more confusion in the expectation you’ll just give up

 

No doubt HR is under orders while screening job applicants for the claims department to seek out the main inept. This isn’t a nasty way to make money. Own shares of UnitedHealth Group (UNH 59). If you are past 50 you should go further in matching your growing health care liabilities with appropriate assets

 

I like Quest Diagnostics (DGX 58) since it will benefit as tort lawyers scare doctors into doing unnecessary tests. Amgen (AMGN 73) sells inflated quantities of erythropoietin at inflated prices. It s a very good proxy for the whole drug industry. Cable service is a giant cash drain in lots of households

 

So buy Time Warner Cable (TWC 78). Its next monopolistic rate hike will warm your heart. Irate cellular phone customers should be in AT&T (T 35). The energy industry is run by this type of capitalists who make the guys at Bain look like amateurs. Don t let them get you down

 

Join them. Buy into a petroleum producer. In case your commuting costs are high add shares of gasoline supplier Valero Energy (VLO 24). It’s well positioned to gouge drivers during the next squeeze on refining capacity. One of the economic hazards we confront is that the 535 public servants sitting in our legislature will enact more laws

 

You can t buy Congress directly but you can zero in at the junk pile that passes for a tax code. Intuit (INTU 58) publisher of tax software benefits from each buffoonish amendment or temporary extension. Get from your low-yielding ­Treasury bonds. These are safe if you measure safety by month-to-month fluctuations but quite dangerous if you measure it by the ability to cope with the cost of living

 

By adding some equities well chosen to parallel your financial exposures you’ll reduce risk over the long term. If nothing else you’ll reduce the risk of having a stroke next time you pay bills. Go to blogs. forbes. com/baldwin for tax-wise investing strategies

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