Foolish ‘Experimental’ Stock Purchases

By: ,

About once a month I ‘lecture’ my younger brother on how his portfolio performance would improve if he quit tossing in purchases of junky stocks with his generally conservative portfolio. You know what we mean here-a batch of investment grade preferreds and then a couple penny energy stocks tossed in just for the ‘fun of it’.  All of a sudden your 6-7% gains get whacked in half.

We have to admit that while I tell my younger brother to stop buying some junk from time to time I do the same thing. In my case I do my ‘dumb’ purchases with issues of companies that are a good ‘story’.  For instance our most recent purchase of a stock that is highly interesting, but has no history, was the purchase of 8point3 Energy (ticker:CAFD). 8point3 is a new MLP dedicated to owning solar farms–an area I have vast interest in. Not that I believe it is good as a investment–I really don’t think that it will be a good buy until 5 or 10 or maybe 20 years from now, there simply is too much cheap energy around for solar to make solid financial sense.  So we got exactly what we deserve–in 1 short month we lost almost $4/share. We are only fortunate in that we took only a small position, but in the end when we are in a tough investing environment we are very unhappy with a obvious investing mistake.

In summary we once again vow to not make mistakes that are so obvious–even if it only costs us 1, 2 or 3/10ths of a percent on our performance — it is simply foolish to throw away hard earned money.


Tim McPartland

Connect with Tim McPartland

Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
Search Dividend Investor