In 2005, 450 sheep jumped to their deaths, according to USA Today.
One sheep dove. Another followed. All of a sudden, a flock of sheep began jumping off a cliff for no real reason. Shocked shepherds watched as another 1,500 jumped. And many of the sheep unfortunately died.
Why did this happen? All of those sheep were caught up in herd mentality. They jumped because the others jumped.
And as unusual as this story may sound, it’s not uncommon. In fact, this very same thing happens each and every day among traders and investors.
We buy because everyone else does. We sell because everyone else is. We ignore the same stocks because everyone else seems to be doing that.
But we seldom question what we’re really buying or selling, which can be quite costly. Sometimes, the best stocks are those that the herd won’t touch.
In short, many traders and investors act like blind sheep.
Look at EnviroStar (EVI) for example.
The company distributes commercial, industrial and vended laundry and dry cleaning equipment and steam and hot water boilers throughout the United States.
When we recommended it, EnviroStar was not the most exciting company in the world. But fundamentally, it was.
In early 2013, this small, boring company reported that its quarterly revenue had just soared 29.4% to $6.44 million year over year. Net income had skyrocketed 713% to $125,155, or two cents a share from $15,396 year over year. In short, this company was no stranger to growth.
Better yet, it was trading at a very attractive price. We couldn’t overlook this. So, we issued a recommendation at $1.60 in the June 2013 issue and waited.
Over the years, interest grew, as did quarterly revenue and net income. Recently, after reporting that quarterly revenue soared 177% to $26.3 million and net income jumped 60% to $600,000, the stock hit a high of $42.98, for a potential gain of 2,638%
In addition, operating income was up 74% to $1 million and adjusted EBITDA increased 169% to $1.6 million.
We should also note that the company recently declared a special cash dividend of 12 cents a share that was payable January 9, 2018 to shareholders of record at the close of business, December 26, 2017. That dividend was 20% higher than the one paid in 2016.
Again, never overlook boring stocks, even if everyone else is. You may just be ignoring the next 2,500%+ winner featured in The Cheap Investor.