Unpeeling Ideas From 'The Onion'

 | Nov 18, 2013 | 9:45 AM EST  | Comments
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Stock quotes in this article:

rsh

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goog

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cmg

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nflx

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aapl

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ko

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save

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luv

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FB

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For someone who absolutely loves the hilarious, satirical publication The Onion, you can imagine my delight when I had the opportunity to visit the offices of that august institution last Thursday in Chicago. My cousin's son Gus is a video editor there (cross-publication shout-out!), and hosted me for a walk-through. As I watched the young staff go about their business, I considered that they are likely completely unaware of the role they can play in assisting us, the investment community. 

What? 

Yes, you heard me. Reading The Onion can actually be a useful input into your investment decision-making process. Obviously you don't read it for balance-sheet analysis or stock picks, but it turns out that this publication is a great reflection of the current thinking of average America. Much of what The Onion does is creatively satirize elements of everyday life that we all experience. So, along with the many other inputs, The Onion can be an occasional tip-off when "conventional wisdom" or popular perception disagrees with your investment thesis on a company. 

I realized this way back in 2007, when Radio Shack (RSH) had hired a new CEO who was attempting a turnaround. Wall Street was optimistic he could turn it, and the stock was up. I was skeptical, and The Onion cemented my feelings on it by running this story: "Even CEO Can't Figure Out How RadioShack Still In Business."

Radio Shack (RSH) -- Daily

That sentiment seems to lingered over the years, as well, based on this blurb from a year ago: "Radio Shack Employees Check Up On Traps To See If They Caught Any Customers Overnight." So you may want to think twice if you're tempted to roll the dice on the stock at this point.

By the way, if you're thinking The Onion also goes after well-respected companies, too, search for some of your favorites. Such names as Google (GOOG), Chipotle (CMG), and Netflix (NFLX) are generally not the butt of their jokes. 

So, if you accept my thesis, let's explore which companies appear to be experiencing a turn in how the public feels about them. Keep in mind the direction of causality: The Onion doesn't drive public opinion -- it reflects how the public feels. 

Our first example is that former love for all of us, Apple (AAPL). I turned against Apple about a year ago, although the market had shifted its opinion on it a few months before. This video clip reflected the problem Apple created with "New Coke (KO) moment" -- its faulty Maps app: "Apple Promises To Fix Glitches In Map Software By Rearranging Earth's Geography." 

Another piece from September was even more damning: "Apple Unveils Panicked Man With No Ideas." After all, this reflects seemingly universal concerns: What can Apple do to drive high value innovation? Can the company ever be the same without Steve Jobs at the helm?

The Onion can also reflect the outright disdain the public has for some companies. Looking at the chart, you would think Spirit Airlines (SAVE) has a great product and is loved by the public, much as with Southwest Airlines (LUV).

Spirit Airlines (SAVE) -- Daily

Guess again. Only Wall Street, which has never actually flown the airline, could be enamored of that miserable experience. The Onion nailed them this spring in this piece (warning: strong language).

"According to a new report released Tuesday by the Federal Aviation Administration, Spirit Airlines, the American low-cost air carrier, is the absolute [redacted] worst and is actually a giant rip-off. The 250-page report, which repeatedly calls the entire airline a scam, openly questions how Spirit is still in business if it sucks so [redacted] bad . . . Nobody with any shred of dignity should ever fly Spirit Airlines, the report states."

Other names are generally respected by The Onion -- and, therefore, in public opinion -- yet it may start to call out key issues. The headline of this October piece on Facebook (FB) reflects a creeping fear among investors. The title of the piece presumes a mass exit from the social network: "Why Are We Leaving Facebook?" Really, how many people use Facebook more heavily now than they did three years ago, when it was a novelty? Ask around. (Having said that, I am long the stock near-term, as the company has great earnings momentum. The jury is out beyond the next quarter or two.) 

Finally, lest you think public opinion is only negatively shown in The Onion, it can be helpful for the positive ideas as well. For instance, three years ago the Onion ran this feature, an installment of a "Dear Abby"-like advice column, that had perfectly reflected trends in the online travel industry. It begins, "Dear Travel Agent Trying To Hold On To His Last Client."

This alone would not have convinced you to buy Priceline (PCLN), of course, but it could have sparked the idea to research the stock, or confirm what you already knew: that the Internet has completely disintermediated the travel industry. Priceline's shares have nearly tripled since that article's publication!

Priceline (PCLN) -- Daily

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