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Solyndra - a warning to investors

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September 02, 2011 – Comments (0)

This company was the herald of an economic rejuvenation - green jobs. It was celebrated and widely supported: it received $500million loan from taxpayers, and even the President showed up to praise the company. A couple of days ago, it declared Chapter 11 (which is a reorg, so it may reappear like GM did), 1,100 people lost their jobs, and took with it all those tax dollars.

This ought to be a warning to all you Fools: do your due diligence before investing in anything. There are many valuable Fool articles on how to do this. Yes, I know: this is a total pain, not to mention many nights of studying obscure, financial disclosure documents. But, for me, a company should have at least:

***a product that people are buying, and will buy more of

***the ability to control costs and increase profits

***management that minds its p’s and q’s

I wonder how many times us fools (small ‘f’) have invested with our hearts rather than our minds. How many times have we invested in a company that had only one of the following:

***an interesting product that appeals to our intellect or a compelling story

***a flamboyant CEO who is good at PR

***we personally use and enjoy their product

By itself, none of these are a reason to invest our hard earned $$$ in a company. Take a look at Solyndra’s website. They make a really cool product I think is brilliant: solar cells that are cylindrical, the theory being that it captures more sunlight than flat cells, and are therefore more efficient. Problem: no one wanted to buy them. I suppose you could blame it on the current shakeout of the solar industry about lowering demand and decreasing cost of Chinese solar material, but this is beside the point. This product had no history of strong sales or profitability. To be fair, though, this company was based on private equity and did not trade publicly, but how many of you fools (again, small ‘f’) would have jumped into an IPO from Solyndra? Hmmm? The story here reminds me of Fool recommendations for DNDN or PACB.

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