Foolish ‘Experimental’ Stock Purchases

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.