December 11, 2006 –
CAPS has opened my eyes to what I think are some really great stock opportunities. However, just because CAPS says so doesn't make it so. Nuvelo Inc, as of right now, has a CAPS rating of 66 outperforms and 5 underperforms. For those of you who haven't heard, Nuvelo is down 80% today. It is highly unlikely to outperform for those who have already invested. These are the hazards of speculating instead of investing. Nuvelo has never posted a profit. Their net deficit the last three years has been $50M, $49M and $72M. In fact, Nuvelo has shown steadily decreasing income. The only year in the last 10 that their net income increased was between 2003 and 2004 when it rose from negative $50M to negative $49M. Let's put it this way, Warren Buffett is not going to buy Nuvelo stock anytime soon. Their company has never made money and perhaps never will. If you are hoping that some giant event (like the patenting of a miracle drug) will suddenly make the company you own profitable when it has never been, then you are speculating (especially, in this case, if you are not a doctor and know relatively little about blod-thinning pharmacuticals.) Investors in this security violated both of Warren Buffett's two rules of investing 1) never lose money 2) never forget rule #1. It's okay to go against the herd; it's even okay to go with the herd so long as you know where you're headed and why; if you don't, you could end up marching off the end of a cliff wondering why you didn't just stop and get directions. [more]
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