Who do you trust?

Remember that old game show of the '50s? The host was none other than Johnny Carson. If you invest in the stock market you play this game everyday, whether you know it or not.

When I was a stockbroker, it always fascinated me to see people invest money in things they know very, very little about.

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This time last year, gobs of lemmings were buying Lucent (NYSE: LU), and this is about the sum of what they knew about LU.

• It was a spin-off from AT&T
• It had had a very big rally
• A friend of theirs owned it, and they wanted to own it

That's about it. After that, they actually knew very little about Lucent. So, they bought it at $50 or $60, and look what happened ($10.50 today).

That won't get us where we want to go. Some people spend more time checking out a pair of shoes that they pay $50 for, than they do an investment made with a lifetime of savings. That is absurd -- and sad.

The first thing you want to do before you buy a stock is to find out about the integrity of the management situation. You want to check out the track record. I constantly reject stocks here at Positive Patterns as "buy candidates" because of management teams, histories and track records.

Warren Buffett often cautions that if someone will lie to others, they will often lie to themselves, and that is trouble.

Take a company like Archer Daniels Midland (NSYE: ADM). Look at its financial statements; it is being sued by everybody. The latest ADM report I requested was 26 pages long, almost half of which was devoted to pending litigation. Fuhgettaboutit. These guys have more lawsuits going than Larry Klayman and Bill Clinton together!

In every case, it is the customer that is suing ADM. That is never a good sign. Two former top execs are now cooling their heels in the slammer for activities they performed while serving in the executive suite at ADM. One is the son of former CEO Dwayne Andreas.

Mr. Andreas, ever the fool these days, stepped down to quell the uproar and brought in his nephew to keep the CEO seat warm for a while. There is not one person on Wall Street (that follows ADM closely) that is fooled by this move; even though Mr. Andreas has "stepped down," he is obviously still running the company.

To make matters worse, Mr. Andreas is attempting to pave the way for his son (in jail) to move into the CEO's chair, just as soon as his parole office will let him. (The brass at ADM will probably deny this, but if you look at the track record of truth-telling in the executive suite at ADM you will, I believe, find it very wanting.)

This is the very essence of the kind of stock you want to avoid.

These kinds of stocks will never be cheap in my mind. Someone you cannot trust is someone you want to avoid in the stock market. It's never cheap to deal with deceit.

Here is an example of the kind of company we look for when investing.

Smithfield Foods (NYSE: SFD). CEO Joseph Luter and his family own a large share of this company themselves. I have been following this company for the last 18 years, and have never seen Mr. Luter make a statement he could not back up. He is not boastful, but he does deliver on his promises. He consistently under-promises and over-delivers.

I have watched Smithfield for many years, observed its moves, moods and successes. I trust the company to take good care of my clients' money.

Ten years ago, Mr. Luter decided it was time to vertically integrate Smithfield Foods by growing their own pigs. At the time everyone thought he was nuts, and the stock was a favorite among the shorts. Mr. Luter was (plainly) right, the naysayer's were (plainly) wrong.

Today Smithfield is the No. 1 pork company in the United States and is far and away the most vertically integrated of any pork producer around. Again and again it has paid to be that way. When pork prices drop at the farm, Smithfield makes it up at the supermarket. When pork prices go up, Mr. Luter makes money both on the farm, and at the supermarket. The vertical integration program has given Smithfield an edge no other major competitor has.

Mr. Luter does not go around whining about how his stock price should be higher. He is great at acquisitions and has made important inroads into the foreign markets, a key to future growth.

In short, Mr. Luter is an outstanding individual. Unlike many corporate execs, Mr. Luter from time to time even buys Smithfield stock on the open market. He is not going anywhere; he is working for the best interests of the shareholders. How do I know this?

Since Mr. Luter took the reins at Smithfield the stock has given patient investors an average yearly return of 27 percent a year for the last 25 years. This, in a business Wall Street calls "cyclical."

Among all the Fortune 500 food companies, Smithfield beats each and every one of them for returns since 1975. Think of all the fine food companies you know, and remember that Smithfield is No. 1 by this critical yardstick. Isn't that where you want to be?

It will always be about 'who do you trust' on Wall Street. If you don't know the answer to that question before you invest your hard-earned money, be forewarned there are many out there with plans to exploit your ignorance, and it will hurt.