When Foolish Fools Disagree. Dueling, stay out of the way and do your homework!!!
When Foolish Fools Disagree.
Upfront, I’ll admit I’m biased. One would assume that most other bloggers writing about particular stocks are biased as well. . Biased can just mean that they have done a lot of homework/research and believe in their position or that they bet the mortgage on a stock and want to convince themselves even further.
One would hope that article writers on Fool are either not biased, or would also say so upfront in their articles. When Fools disagree, it’s clearly a big signal, (though you should be doing so already), to do your own research!!!!
For example:On Dec. 26th fool writer Todd Wenning penned an interesting and timely article entitled What to Sell in this Market
Knowing when to hold ‘em and when to fold ‘em is extremely important, and when there are many value plays available why hold onto those that have little momentum in the short run, tying up your cash. I’ve had similar discussions with friends/family who really thought they couldn’t buy anything, because they didn’t want to add any new money to their portfolio nor sell what was currently losing, conceding a loss.
Foolish hat off to Todd for taking on this topic. Unfortunately, while Todd’s examples of value plays rang true, the advice on tossing out high debt, no cash flow companies left a little too much foolishness on the table unexplained. One should ask why they were in these type of companies to start with. Motley Fool is big on “buy what you know” and believing in what you buy. Stocks with high R&D, especially tech stocks and medical stocks have very foolish statements. Getting into them is risky, but the reward can be greater. Looking at Todd’s two examples of what to sell:
1. Palm (PALM) just announced, and their stock went up 33%. I think it’s temporary and caught me off guard, but other than some CAPS points, I didn’t follow the industry. Two-thirds of float traded hands Friday, so many want out and many want in, or shorts need to cover. R&D on the table, product announce pending, blanket guidelines to sell should be taken with Foolish thought.
2. Raser, (RZ) as it’s followers know has been taking on debt for a reason. When you go from R&D to products, the make or break is near. Heavy in R&D is risky. If you don’t produce a product you’re dead. One might ask themselves under what type of conditions could a company get $20 million in additional funding in November after the credit market tightened? Actually Merrill Lynch and Prudential were happy to make additional loans against RZ’s deadweight stock. If you follow the comments at the bottom of the article, you would see that RZ has two projects going. Having two projects might be concerning; if you don’t know what you want to be when you grow up, you may not be a good candidate for people to invest in. However, the auto shows are this week and Raser’s initial premise was it’s Symetron™ MOTOR TECHNOLOGY. If any of the car companies currently being pressured to produce energy efficient cars and to stay solvent elect to use Raser’s technology in their PHEV vehicles, things could get very interesting for Raser.
Second, Raser has gobbled up lease land to support geothermal power. They have some unique modular scaling techniques that will pipe power to Anaheim in a few weeks, a scant six months after breaking ground. Additional new technology allows even lower temperature drillings to be useful. King Arnold’s decree that energy will be clean and President Elect Obama’s stimulus package will make this a very strong play.
I find it unusual that Todd used companies that are heavy in R&D, without any discussion about future products, in order to make his debt/cash flow point. If you discussed debt/cash flow around “mature” companies, who were not banking their future on R&D results, then you’d have a good case for when to fold ‘em. I seriously doubt that Raser was a household name, and the use of their company in this article spoiled some good advice.
The follow up on December 30th by Brian D. Pacampara, on Monday’s Biggest Stock Stars, showed Raser as one of the biggest one day drops.
I won’t suggest that Todd got it right, or that Todd influenced Rasers’ fall (though with the volume they have and the 10% short squeeze, I won’t say it didn’t). I do find it interesting that in Brian’s article, I’m the lead quote on bullish for Teck Cominco (NYSE: TCK), which had scored a nice run. Guess I’m bullish on the winner and bullish on one of the losers…..par for my fragile caps score.
Again, clearly I’m biased. I’ve been researching Raser with every piece of data I can find. The plants running at Thermo and Senator Hatch helping cut the ribbon have been educational. Understanding what Geothermal offers is exciting. I’ve been buying Raser while the price continues to drop. I’m happy to have people talk it down, but under the premise of an educational article, this one seems to be a bad choice. You have to know when to hold ‘em and know when to hold ‘em, but sometimes you have to know when to look beyond the balance sheet, do your own homework, (hence risk/reward), and double down!
I expect I’ll know by the end of January whether this was a good bet or not. From Senator Orrin Hatch's speech at the ceremony:
“God bless all of you, and God bless this project. It’s going to be expanded exponentially and it’s going to benefit millions of people in the end, and may be providing one of the main answers to energy needs in our society.” -Senator Orrin B. Hatch
P.S. I think He's Biased Too!!!!!