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Fool Blog: Stocks We Wouldn't Recommend to Our Worst Enemy

I (Brian here) wouldn't buy, recommend, or even research an airline stock. That's no knock on the almost universally congenial employees I've encountered over the years on AMR's (NYSE: AMR  ) American Airlines, UAL's (Nasdaq: UAUA  ) United Airlines, Southwest Airlines (NYSE: LUV  ) , and so on.

Airline travel remains a technologically wondrous invention to me. When I hear people talk about how the Internet will forever change the world, revolutionize the way we communicate, yada, yada, I think of the real disruptive innovation of the past hundred years: flight. (Remember the last time you took a boat across the Atlantic? Yeah.)

But for the most part, airlines have made for poor long-term investments. Yes, I'm sure someone will make money betting on a turnaround at some of these companies. And yes, I'm sure there are some airline opportunities outside our shores that look attractive -- but I'm not biting.

To say it's a cutthroat industry may be an understatement -- competition is fierce. Commodity prices frequently ruin even the best-laid plans. (Think $50 to fill your car is a lot? Try filling up a 747!) Governmental regulation is a constant wild-card.

So as a consumer, airlines = good. As an investor … no, thanks.

I (Joe here) peg solar stocks as a whole offering a double helping of being shockingly overvalued and having questionable economics. Hey, at least airlines are cheap!

Don't get me wrong: Solar power is here to stay, and the race to grid parity has a finish line in the not-so-distant future. But who wins? Which technology wins? Is it a thin-film player like First Solar (Nasdaq: FSLR  ) , a predominantly photovoltaic player like Suntech Power (NYSE: STP  ) , or an offshoot of traditional PV production like Evergreen Solar (Nasdaq: ESLR  ) and its ribbons? Who knows?

Not I. Or you, for that matter (nothing personal). Solar power, I love. But solar stocks? Fool, please: You'll burn yourself.

Joe has a point when it comes to solar stocks. Heck, I (Tim) said much of the same stuff months ago. But rather than begrudge Joe for not having an original idea, I'd thought I'd tell you about newspapers: a once proud industry that should now be put out to pasture.

It used to be that every city had a newspaper, and that newspaper had an information monopoly. As a result, everybody in the city subscribed, and so to reach those potential consumers, every business in the city advertised in that newspaper. It was a virtuous and profitable cycle for the paper, and it was the reason master investor Warren Buffett purchased both the Buffalo News (whole) and Washington Post (in part) for Berkshire Hathaway (NYSE: BRK-B  ) .

But no longer. With the advent of the Internet, people in New York can read The San Francisco Examiner or The Shanghai Daily as easily as they can read The New York Times. Moreover, if you never liked The Times' editorial page, you can unsubscribe altogether and read blogs.

All of this is to say that advertisers can no longer rely on newspapers for audience, and so newspapers can no longer rely on advertisers for revenue. It's a dying model, one that many newspaper companies today are struggling to adapt to. And even newspapers with storied brands are in trouble, because the money today is not so much in producing content but in aggregating it.

Of course, there's a philosophical question about what happens when we all stop producing content and start aggregating it, but this is about investing ... so let's not go there.

Newspapers: redux
Tim makes a good point about newspapers. So good, in fact, that I (Joe here) made it 15 months ago. But rather than begrudge Tim ... well, you know what, consider Tim begrudged.

Newspapers: the final word
Well, I can't blame Joe for that. He didn't even work here when I (Tim) wrote this three years ago. This is beginning to become a startling track record for an idea thief, wouldn't you agree?

Your thoughts here ...
What are the stocks or industries writ large that you would avoid at all possible costs? What about the ones you wouldn't wish on even your worst enemy? Chime in with your answers in the comments box below.

There is no truth to the rumor that Brian Richards, Joe Magyer, and Tim Hanson are boxing for the U.S. Olympic team. Neither Brian nor Joe owns shares of any companies mentioned; Tim owns shares of Berkshire Hathaway. The Fool also owns shares of Berkshire. Suntech Power is a Motley Fool Rule Breakers recommendation. Berkshire Hathaway is a Stock Advisor and Inside Value selection. Read up on the Fool's disclosure policy.

Read/Post Comments (4) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2008, at 4:05 PM, prginww wrote:

    Hedge funds...neither the product nor the purveyors (e.g. Blackstone and Fortress). Leverage + Scant regulation + Derivative instruments Einstein would barely understand + Ridiculous levels of risk = An impossible valuation exercise. Hedge funds are sexy and buying stock in them feels like entering a secret society, but the secret is hedge funds are long-term losers. And that ain't sexy.

  • Report this Comment On July 03, 2008, at 3:31 AM, prginww wrote:

    Government lifts solar project ban on public lands


    "UPDATED: The BLM reversed the moratorium on Wednesday, shortly after an urging from Senator Sanders during an Energy Committee hearing. Read the BuzzFlash Alert.

    While the Bush administration put a two-year moratorium on solar energy projects on public land last week, Sen. Bernie Sanders (I-VT) and colleagues drafted a bill to promote the creation of 10 million new solar rooftops in private homes and businesses over the next ten years.

    The bill, co-sponsored by Senators John Kerry (D-MA), Ben Cardin (D-MD), Arlen Specter (R-PA), John Warner (R-VA), and Robert Menendez (D-NJ), provides incentives for solar unit installation, covering about half the average costs.

    The proposed units are photovoltaic systems that use panels to turn sunlight into energy. The moratorium suspended both photovoltaic and concentrating solar plants--concentrating plants use mirrors to direct light to power steam turbines. "

    Just think about all the downgrades and bad talk about solar stocks from MF and then this....

  • Report this Comment On July 03, 2008, at 10:41 AM, prginww wrote:

    I wouldn't invest in Internet stocks or anything that runs on electricity (batteries ok). Electricity depends on oil, coal, nuclear, natural gas and well, you know, commodities like those are getting so expensive that we want be afford to operate our electrical gadgets. We're going back to the abacas and newspapers!! Ha!

  • Report this Comment On July 31, 2008, at 7:21 AM, prginww wrote:

    noahnoaa, there will be plenty of electricity. I think photovoltaic is the household electricity source of the (near) future, at least here in the US. I expect to have panels on my house within 5-7 years. And oil isn't going away until it's all gone, which despite the Peak Oil frenzy isn't going to be for an awfully long time yet. (I'd love to see Peak Coal come and go -- we really shouldn't be burning coal for electricity at this point -- but that's a separate discussion.)

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