Celebrity investors come and go like the wind, they don’t always hang around and fairly quickly their celebrity shine can disappear. That is not to say that all celebrity investors fall by the wayside, get dragged into a pump and dump because there are some success stories. So, is it safe to follow celebrity investors?
Weight Watchers
Before we begin looking at celebrity investors and the pros and cons of following them into a new market, let us look at Weight Watchers. In March 2017 the stock was trading around $15 on the US stock market when Oprah Winfrey took a stake and became active within the business. This is an investor who put her money where her mouth is, put cold hard cash on the table and was willing to work to improve the business. Many shrugged their shoulders, looked the other way and ignored this particular celebrity investor who is now a billionaire.
Since March 2017 Weight Watchers shares have trebled to $45 and there is every chance that the bull-run is not yet over. By becoming actively involved in the business Oprah Winfrey has not only benefited shareholders but she has also benefited her own fortune to the tune of $340 million – all since March!
So, there are some success stories!
Oprah Winfrey has a habit of getting involved in businesses in which he has particular knowledge and she knows she can add value. This is exactly what she did with Weight Watchers and no doubt investors will be watching carefully for her next active investment. She has literally breathed new life into a share which was struggling and a business model which was looking old and past its sell by date. However, do all celebrities have this impact?
Unfortunately there are some celebrities who add their name to a shareholder list purely and simply for the press coverage and don’t always offer value to the company. They may inject a bit of upward momentum into shares upon the announcement have taken a stake but unless they are actively involved in the business this can often fade fairly quickly.
Fundamentals matter not celebrity investors
In the case of Weight Watchers the underlying fundamentals prior to Oprah Winfrey’s involvement were struggling, making little headway and the business was effectively going backwards. However, the fundamentals change dramatically when Oprah Winfrey got involved and new services were introduced. This changed the future fundamentals of the company dramatically hence the continued rise in the share price. Some investors may have been waiting on the sidelines to see how Oprah Winfrey progressed although slowly but surely interested investors have been drawn into this success story.
If it was simply a case of Oprah Winfrey investing in Weight Watchers, sitting on the sidelines and letting the future take its course with no input, they would not be where they are today. So, the moral of the story is unless a celebrity investor has something to add to the company, don’t automatically assume it is bull market time. Historically, celebrity investments have been all about the celebrity and not always about the company. While Oprah Winfrey has grabbed many press inches with her involvement in Weight Watchers the company has attracted as much interest for itself.