Doomed Stocks You Should Avoid

The amazing thing about this market is that there are so many cheap stocks. The problem with this market is that there are so many companies that could really blow up on investors.

Your investing success in the next year will be largely determined by your ability to sniff out and avoid losers. With that in mind, here are some suggestions for stocks you should avoid.

Speculative companies
Right now, you should avoid money-losing businesses, companies that need high growth to justify their high earnings multiples, start-up companies that are dependent on the growth of new markets, and other speculative stocks.

Right now, you can find solid, blue-chip stocks that are undervalued by unprecedented amounts. If you can buy a stock that should be trading at double or triple the price, why would you want to risk your money on a stock with less probable gains? In such an environment, speculative bets just don't make sense.

For instance, right now General Motors (NYSE: GM  ) is trading at 66-year lows -- and the stock still isn't cheap. The company is projected to lose money as far as the eye can see, and it's begging for government assistance. Why would you even consider buying GM when you can get Microsoft (Nasdaq: MSFT  ) -- arguably the strongest company in the world with $18 billion in yearly income -- at less than nine times its forward earnings multiple? GM simply doesn't make sense.

When even established, well-capitalized companies are seeing strong headwinds, stay away from the companies that aren't well-positioned.

Cash-poor businesses
Sometimes businesses report earnings but don't produce cash. Sometimes earnings are recognized as an accounting gain immediately, but the cash comes in later. Sometimes capital expenditures can exceed the operating cash flows. None of these should give you confidence in a market like this one.

In good times, cash-poor businesses can borrow money or sell equity to tide them over until the business starts producing cash. But in more challenging times, they may only be able to borrow at high rates, sacrificing the long-term cash flows of the company to service the debt. Worse, they may not be able to borrow at all -- and thus be forced into bankruptcy.

It may not even be the result of poor management -- some industries are chronically cash-poor because of their capital-intensive nature. Semiconductor companies, for example, often have to spend their profits on the next generation of equipment just to compete.

LDK Solar (NYSE: LDK  ) , for instance, has been profitable and growing quickly. But its operations are burning cash despite big advance payments from customers, and that's before their huge capital expenditures. Of course LDK needs to make capital expenditures to grow, and thus far, it's been successful selling shares to raise cash. But the lack of free cash flow is nevertheless worrisome in an environment in which cash is not flowing freely to make up shortfalls.

Near-term debt maturities
The credit crisis we're in means lenders are risk-averse and attempting to reduce their leverage. That means that even profitable companies can run into trouble if they have debt maturing that they can't pay off from cash or roll over.

General Growth Properties (NYSE: GGP  ) , for instance, has strong funds from operations, but it's facing a liquidity crisis because it has an additional $1.2 billion in debt coming due in 2008 that it has yet to refinance. Even if the company doesn't go bankrupt, shareholders could face massive dilution. ProLogis (NYSE: PLD  ) is in a similar situation, with high debt, $353 million of which is maturing in 2009.

Given the tightening of corporate credit across the board, stay away from companies with significant debt coming due anytime soon.

Broken business models
Because credit is the grease of the business world, the credit crisis means the rules of the game have changed. Business strategies that worked two years ago, like depending on borrowed money, are now much less feasible.

Consider securitization, the practice of pooling loans into bond-like securities and selling them to investors. The housing bust has caused the value of mortgage-backed securities to plunge, and other securities have done the same. Consequently, investors are reluctant to buy -- and while these securities are unlikely to go away, they may become more regulated. They'll certainly be much harder to sell, and therefore less profitable, in the future.

It's apparent that this change will affect most lenders, from Capital One Financial (NYSE: COF  ) to General Electric (NYSE: GE  ) . But it will also affect manufacturing companies like GM. If car loans are harder to securitize, consumers will be charged higher interest rates, and that will in turn reduce the demand for GM's vehicles -- and thus for all of the parts, supplies, and labor that go into those vehicles.

So you should be cautious of companies that have business models that don't work in an environment where it's hard to borrow money at reasonable rates, businesses are deleveraging and downsizing, and consumers are scaling back.

The Foolish bottom line
All that being said, don't just blindly avoid any stock that has one of these flaws. Do, however, investigate further. Sometimes the issue will be catastrophic for shareholders, but sometimes it will simply be a small hurdle affecting a fraction of the overall business.

These are just some of the issues we examine at Motley Fool Inside Value while deciding whether a stock is truly cheap or just a value trap. To see our favorite stocks in this market, take a 30-day guest pass to Inside Value. Click here to get started -- there's no obligation to subscribe.

Fool contributor Richard Gibbons also avoids narwhals, nail guns, and knaves. He does not have a position in any of the companies mentioned in this article. Microsoft is a Motley Fool Inside Value pick. The Fool's disclosure policy is anything but doomed.


Read/Post Comments (59) | Recommend This Article (399)

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 December 05, 2008, at 12:00 PM, ferrari999 wrote:

    This guy is a joke.

    Many companies are burning thru cash- why does he choose LDK to spotlight? Another agenda?

    From what i have read in their PR's the CEO says they have plenty of cash on hand to fund operations as well of lines of credit from major Chinese Banks. They also have millions in prepayments already booked (take or leave type deals)

    With China's infusion of billions of dollars in green tech over the next 4 years IMO LDK is one of the few Int'l companies positioned to take advantage of this situation. In addition we have Obama's Green programs just around the corner to futher highlight the Solar space and get it moving again. Solar has been killed- But to pile on a Industry leader and one of the few that will survive if their is a shakeout is FOOLISH and a joke.

  • Report this Comment On December 05, 2008, at 12:28 PM, Gryphon433 wrote:

    I agree, this guy is a dolt. Does he not know the difference between GGP and PLD? Different businesses, different models, different everything. That they have $350M coming due in 2009 matters, but has he not read that they refinanced $315M in the last week? Pay attention! This is one of the finest companies and organizations in the logistics and warehousing space. Get a grip!

  • Report this Comment On December 05, 2008, at 12:31 PM, Theresewin wrote:

    http://denver.bizjournals.com/denver/stories/2008/12/01/dail...

    you might want to read this about pld....not as grim as you make it sound...bad yes but potential is still there...

  • Report this Comment On December 05, 2008, at 1:44 PM, jesj69 wrote:

    Yes,GGP has debt problems like many others and a certain amount of risk is implied. But why is it that right at the moment of truth,several major players are investing very aggressively in GGP ? Barclay's still has them valued at $7-$16 per share.

  • Report this Comment On December 05, 2008, at 9:13 PM, wilsonced wrote:

    I think the point the author is making is that many companies that look good in one aspect, or appear to be politically correct, may have other aspects that could amount to a punji stick in the foot if you are not aware of it.

    Bottom line fools: Do research and make educated decisions.

  • Report this Comment On December 05, 2008, at 10:12 PM, elyonn44 wrote:

    Some time ago I read a very good article in this website about investments, but this one is a real joke. I don't even own solar stocks right now but the author picked one of the best ones (LDK) in the market. The author should at least check simple fundamentals about the stocks he picks like margins, available cash, recent and expected gains, etc. LDK's margins are impressive (highest in the industry) and even with a severe recession, this one has a very high probability of good performance given the plans in China to tackle pollution. It's 2009 production is sold, so yes they need money to meet commitments and expansion plans but they have more than 900 mils to maintain expansion plans. A year ago I was long with LDK and ENER and I still keep an eye on these ones, but superficial and manipulative articles like this one are just a disgrace for this site.

  • Report this Comment On December 06, 2008, at 9:39 AM, lumpfishroe4 wrote:

    It is articles such as these that are convincing me to leave the Motely Fool community. The writer of this string of random words is a monkey. The MF....appear these days to have lost all credibility and are now just printing garbbage in order to pay salaries.

  • Report this Comment On December 06, 2008, at 11:00 PM, dividendgrowth wrote:

    Lots of LDK pumpers here!

  • Report this Comment On December 06, 2008, at 11:50 PM, SMRezzelle wrote:

    Steer clear of alternative energies until the economy rebounds and we can put more money into research and development.

  • Report this Comment On December 07, 2008, at 12:47 AM, Ozcutty wrote:

    Good article, when some of the best co's in the world are on sale why buy the rubbish.

    Solar stocks???? please, do you want to make money or not?

  • Report this Comment On December 07, 2008, at 12:56 AM, elyonn44 wrote:

    It's not about buying solar, it's about picking the right examples. It's about being professional and avoid being partial. I'm not long in any solar stock but the author could pick a real problematic stock, not one of the good performers.

  • Report this Comment On December 07, 2008, at 12:38 PM, catoismymotor wrote:

    I like the flag. Please set it aside for the next hostile take over article.

  • Report this Comment On December 07, 2008, at 1:17 PM, Charlone wrote:

    Solar energy is doomed

  • Report this Comment On December 07, 2008, at 1:20 PM, rafalta wrote:

    Be cautious.

  • Report this Comment On December 07, 2008, at 4:45 PM, Fairhopeguy wrote:

    I love the comment that SOLAR is doomed. I guess the poster doesn't realize that the faster growing sector in technology is Solar energy. It's growing at over 40% per year. Faster than cell phones, PC's and the internet..Combined!

    If you are to look at LDK's numbers you'll see that they are burning cash but they are also building a plant that will allow them to produce Poly silicon for between $30 - $50 kg. Dramatically lower than it is being sold for today. They are also, through innovation pushing to produce wafer's with 21 to 23% effiencies that are thinner than today's wafers. This means higher output with less silicon and a lower cost. This will allow for lower ASP's to the panel makers while allowing LDK's margins to expand into the 30% + range. As far as them burning through cash, their perating cost per quarter are low enough so that they don't have to worry about tapping the market for additional funding. When the U.S. market begins to open up, LDK with it's deals with BP Solar and others in the U.S. should explode, especially since they will be the lowest cost provider of silicom wafers on the planet, and those wafers will have the highest output.

    I like LDK at this level, I like SOL even better, their cash burn rate as a percentage of revenue's is lower, they also have a lower P.E. and Price to Book. Sol is trading at less than half it's book vale and it beat analyst estimates last qtr by .10.. Not bad for a company growing at over 100% yoy.

  • Report this Comment On December 08, 2008, at 11:39 AM, RaulChapin wrote:

    ferrari999 Gryphon433 If you must use ad hominem fallacy to point out the wrongs in this article, how are we to believe that you actually have a valid point.

    Further more, it is really easy to use your free login to pump whatever you feel like pumping today. If it works out you can latter claim that you were right, if it does not, who will ever remember who ferrari999 was or what he said.

    To the contrary of your empty words, the Fool has an archive of the articles they have written and can be later referenced. So every time they made a mistake is documented and every time they were right is also documented.

    If you actually even read this article you would see the fault in your attacks. The author himself says that just because a company might have one of the problems here exemplified, it does not mean that you have to get away from it, just that you should further investigate. By saying this, the author does not automatically discound LDK or KFC or whatever you want to pump, it just says to do your due diligence when looking at stocks with POTENTIAL cash problems.

  • Report this Comment On December 08, 2008, at 12:46 PM, TheMotleySmart wrote:

    This article's caption suggests that LDK is doomed. That's completely not true. The only reason he gives reader is that LDK will lack fund to expand due to capital and credit markets' tightening. The author has no knowledge about how a Chinese company operate or fund it's operation. LDK is THE Star enterprise in Jiangxi Province. It's like Citi or Goldman of Jiangxi, without Citi or Goldman's problem. The government will not let LDK fall into any trouble. It will become a political issue. Deep pocketed Chinese banks will lend LDK fund if needed. Based on the rate that LDK is generating cash, I doubt if they need more loan.

    The bottom line, LDK is a strong player in a growth industry facing favorate policy envirnment in Asia, Europe and US. The US market has not even started yet. And the author sentences LDK to "doomed". What an author!

  • Report this Comment On December 08, 2008, at 3:39 PM, ARJTurgot wrote:

    The market was voting on the demise of PLD today. So far, up +40%. Hmmmm.... do I pocket my easy money or hold out for more... maybe something to do with a large multi-year contract with Daimler. Guess their customers didn't realize they were going out of business.

  • Report this Comment On December 09, 2008, at 5:25 PM, tantricavatar wrote:

    Richard,fair is fair but what has Mr Softee done in the past 5 years or so except down by huge percentages each year?

    Believe it or not,Rich(are you?)I am putting my money in Ford and GM(LONG from 2.08 and 4.35 respectively).As for PLD,I Do NOT have it but,come on,up 40%??

    Yes,it's all a matter of Timing,Rich- whether you are a Fundamentalist or a Chartist/Technician(I am of the Latter sort of Fool ), but haven't you heard of CONTRARY Investing ?

    Usually,the Market is smart enough to ADJUST a Company's Stock Valuation for the Positives and Negatives attributed to it for the Present and,actually,when the Market OVER-reacts on the Positives and Negatives is when it's Manna from the Gods.That's just my take on it.

  • Report this Comment On December 10, 2008, at 12:53 PM, ARJTurgot wrote:

    BUCHAREST, Romania, Dec. 10 /PRNewswire-FirstCall/ -- ProLogis (NYSE: PLD), a leading global provider of distribution facilities, announced today that it has leased more than 100,000 square feet (9,300 square meters) in Bucharest, Romania, to the Flamingo Group, one of Romania's largest electrical retail and IT distribution companies.

    Up again. I just hate it when that happens. Those capital gains are just such a problem.

  • Report this Comment On December 10, 2008, at 4:43 PM, tnyj5 wrote:

    I have enjoyed all the comments. And I'm looking to invest more into alternative energy. I know that no one's recommendation(s) are set in stone. If you were or are investing in any sort of Alt. Energies would you buy from LDK after all that has been said here? I am kind of on the fence here after reading all the comments but I am leaning toward adding LDK to my portfolio. Just need a little more thoughts on the stock. Regards.

  • Report this Comment On December 11, 2008, at 1:02 PM, winomaster wrote:

    "I'm not long in any solar stock but the author could pick a real problematic stock, not one of the good performers."

    What you describe as "problematic" are stocks that are widely understood to be troubled. The whole point of the authors artical is that high flyers can have hidden defects that can only become apparent too late to avoid big losses.

  • Report this Comment On December 12, 2008, at 1:29 PM, rottweilers wrote:

    I am down over $250k in the MdP group. I am convinced these fools could not pick a good stock if they had to.

    All their recommendations are under water. Lots of luck following their advice.

  • Report this Comment On December 12, 2008, at 1:46 PM, fibreoptik wrote:

    @ wino: A-R-T-I-C-L-E

    put down the bottle! lol

  • Report this Comment On December 12, 2008, at 1:48 PM, chrisp5683 wrote:

    I wholeheartedly disagree with the inclusion of ProLogis (PLD) in this discussion. While I wouldn't purchase this stock at its current price ($7.42) in light of its current run-up, this is in general a very good business with a very volatile stock.

    I bought into this stock at $3.24, then after watching it run up to $4, I quickly took my profits. Oops.

    With forward annual EPS of $2/share, advocating that a stock with a P/E around 3 should be avoided is a recipe for missing out on profits, even with $353 million in debt (or $1.33/share) needing refinancing in 2009.

    They could very easily pay off this debt simply by allocating 3 quarters' worth of their projected profits to paying off the debt, let alone refinancing it.

  • Report this Comment On December 12, 2008, at 1:59 PM, JasonMichael wrote:

    If the fool says they are going down.

    They go up.

    If the fool says they are going up.

    SELL SELL!!!

    Keep hanging you hat on stock picks from 8 years ago.

  • Report this Comment On December 12, 2008, at 2:11 PM, knackattack wrote:

    Although buying GM now might be foolish, just a month ago, the Motley Fool posted an article about the company's lead in the lithium ion technology field. GM was trading at 11 then. Consistency would be a good thing at the Fool.

  • Report this Comment On December 12, 2008, at 3:53 PM, PcolaJack wrote:

    All of the rules have changed.

    If it is a reorg of autos we need then ask a reorg specialist. I am one; so what would I do? Break up the big autos into their component brands (like Lincoln, Jag, Chevy, Pontiac, etc.)and have each submit a reorg plan with a separate funding (credit) request -- but congress can't even run itself, much less micro-manage three huge auto companies. Heck, get Lee I. out of retirement.

    As for Solar; I remember a major power company engineer told me a few years ago that I could not get a return on a super insulated commercial building. That was when oil was $18 bbl. He was no where to be found when oil went over $125 bbl. And it will be there again too. Solar is the only way to go. The Fool needs to dump the fool who wrote this drivel.

  • Report this Comment On December 12, 2008, at 4:03 PM, Fooled2again wrote:

    The CEO of WaMu said the same thing ferrari999, even after turning down an offer of $8 a share. Then the week before filing 11 the CFO said he wouldn't stay if he didn't believe WaMu had a future.

    Of course the new CEO 1 month stay cost the share holder's $8 m and the CFO stayed with JP who bought WaPo for 1c on the $.

    If you suck in everything these goons tell you, I've got a couple of toll bridges for sale.

  • Report this Comment On December 12, 2008, at 4:11 PM, TMFDiogenes wrote:

    knackattack,

    I'm not sure which article you're referring to, but the last article about GM's lithium-ion technology said they're falling behind the Japanese. Even so, there's no contradiction because a company can be a leader in lithium-ion technology and still be a bad stock. And even if there were a contradiction, that would be ok: Our writers are allowed to disagree with one another. I can see how that might be confusing to readers, but I believe it's best when we have access to multiples opinions.

    Thanks,

    Ilan

    http://www.fool.com/investing/general/2008/09/17/have-detroi...

  • Report this Comment On December 12, 2008, at 4:31 PM, semperfi120 wrote:

    Buy GM Stock... I'm sure some of you fellow fools can afford a few bucks to show your support. This industry cannot be allowed to fail because of some do nothing confederate republican senators who don't like the word union. Buy GM, Ford and whatever American company you feel inclined to. Do a little homework and see what financial breaks these senators have given the Japs. P.S. my family has owned Toyotas, Saturns, Chevys, and Chryslers and not a problem with them. Let these companies slide and the country slides with them.. Semper Fi

  • Report this Comment On December 12, 2008, at 5:02 PM, Tulsaboyw wrote:

    I would like to remind people about AA (american Airlines)..

    People thought it was going under...it almost did.

    My own dad bought $5000+ of AA stock at $1.40 per share (against everybodies advice including broker) and then later on finanially sold it at $18+ per share.

    Buying Gm may seem not a good idea, but if you have $$ to burn (unlikley) its worth that 'once in a lifetime' chance.

    Ie; thats also how some people during the depression became millionaires soley due to buying oil stocks for 1/100 of normal value.

    But I would buy GM not because a want to support but the investment gamble.

    I could care less about GM from a bailout standpoint.

    Besides big3 cars are not as good as they used to be.

    Besides, we have had other major car companies disappear who while not big 3 were not missed.

    SIze yes, but the unions are making the big 3 pay too much... they are making way too much per hour and have unrealistically sustainable benefits.

  • Report this Comment On December 12, 2008, at 5:04 PM, Tulsaboyw wrote:

    But I rarely speculate myself,

    75% of all my investing is via drips (controled periodic purchase of $$ amt of stock).

    The other 25% is what is used for risk and usualy for landlots to buy and resell..

    For GM - its worth a gamble if you have the extra $$.

  • Report this Comment On December 12, 2008, at 5:29 PM, TopAustrianFool wrote:

    GM and any other business the government bails out is a looser. Until the big lossing 3 stop paying ransom to union employees they will not make a profit. So if you want to throw money away go ahead buy some GM stock and help the shorters make some money.

    And as far as buying American, I don't care where you were born, if you are a communist you ain't American.

  • Report this Comment On December 12, 2008, at 6:24 PM, YogaDaddy50 wrote:

    OK, I can't stand by quietly anymore:

    1. Blaming the unions for management's short term thinking is preposterous. Publicly held companies manage for the next quarter, so it was worth it to detroit to keep pumping out their guzzlers for the next report and caving in to the unions. And, if Americans were not buying them, Detroit would not have been producing them. But, the Big, fat, 3 are dinosaurs and are ignoring the comet heading their way. Watch for a new company that will be making PHEV delivery vans to start. When such vehicles are on the market getting 40 - 60 mpg, the Big fat 3 will be putting their heads between their legs and kissing you-know-what goodbye.

    2. Solar is coming on like gangbusters. Efficient, large scale, electricity storage will mean solar and wind will be power on demand. It will be on the market in about 2 years.

    You dinosaurs don't need to believe any of this. I will be disappointed and crying all the way to the bank.

  • Report this Comment On December 12, 2008, at 6:40 PM, secjd wrote:

    As an attorney, I took a solar company public about 2 years ago - very bright , "serial entrepreneur" chairman who'd been successful at founding an internet company back in the '90s and one of the larger companies in its market segment. The stock initially sold for about $4.00, dipped a bit to @ $2.50, then toook off and peaked at @$16-17.00 last January. Now it's selling at $1.80.

    Solar is and always has been heavily dependent on government tax incentives and subsidies, many of which expired earlier this year and have yet to be renewed - and, regardless of who's in the White House, it is far from certain that they will be renewed at any time soon. Combine that with plummeting oil prices, and you basically have a recipe for short-to-mid-term disaster.

    I'm not saying that alternate energy is not a good investment - just that you'd better be sure that you have the patience and financial wherewithall to wait it out for quite a while. Also, I think it's smarter to look at the WHOLE alternative energy sector, as there are other forms of renewables (wind, wave, etc.) which, from a pragmatic standpoint, appear to show more promise for the near future.

  • Report this Comment On December 12, 2008, at 6:47 PM, SCOTT7272 wrote:

    As to the comments about PLD, it just might work out assuming the lender does not want to foreclose and own the real estate. That is unlikely for those who read the news and perhaps the lender/s would make reasonable deals. The assumption that lenders want to push EXISTING GOOD BORROWERS UP AGAINST THE WALL MAKES NO SENSE.

  • Report this Comment On December 12, 2008, at 7:20 PM, putster53 wrote:

    I personally don't think there are gonna be any Blue-Chip stocks that will be spared from the carnage on Wall Street. The best performers right now seem to be OTCBB stocks. The problem is finding the right ones. Best-case scenario is to buy physical gold and silver buillion. Then, when the big crash hits, you'll actually have something of value-- and it can still be used as currency!!!

  • Report this Comment On December 12, 2008, at 8:28 PM, AriasPalm wrote:

    "Best-case scenario is to buy physical gold and silver buillion. Then, when the big crash hits, you'll actually have something of value-- and it can still be used as currency!!!"

    I don't think so, I just finished reading about the Donner party who tried to make it to California a hundred years ago. Mrs. Donner had a quilt she had sewn about ten thousand dollars into. The quest ended with madness, death and cannibalism, google it. What are you going to buy with gold and silver if we have a big crash? Hoard FOOD! Obama could turn this economy around in one day: eliminate capital gains, cut taxes in half and cut government spending by 10 percent for every year he is in office. Cash would flood back into the economy and he would be unstoppable as well as go down in history. Do this socialism thing and he will be remembered only as a, if you will excuse the expression, fool.

  • Report this Comment On December 12, 2008, at 9:16 PM, Dadw5boys wrote:

    What you never saw comming was one of the big Limits that Consumerism must bump against was the world of Capitalism expaned around the globe.

    In case you did not know it "GOING GLOABLE" is a very aggressive Capitalist Statement. It means our Businesses supported by our Military is comming for the Natual Resources even the labor of your country.

    It took the world a few years for these forgien countries to totally understand this and now thier reaction is understandable. Kicking the Americans and other forgein businesses out and taking control of their PRECIOUS natural resources was what any good government would be expected to do to protect it's citizens Equity. Of course this creates problems in the stock market. That is what your experiencing now. Lack of access. No mater how the government hides the facts that is the probelm.

  • Report this Comment On December 13, 2008, at 1:24 AM, norminsd wrote:

    I'm done with the Fool. All their stats are old news, sometimes many months old.

    I have 23 stocks up from 50% to 250% since Nov. 20, 2008. Let the Fools beat that. N.W.

  • Report this Comment On December 13, 2008, at 2:17 AM, tinkerbelle123 wrote:

    dear norminsd,

    Can you honestly give the name of just 1 of those 23 stocks that are doing so well? I'm learning, but am a new trader, and have been not as astute. I'm a fool who'll believe you.

  • Report this Comment On December 13, 2008, at 2:45 AM, whackamolebuyer wrote:

    hey tink,

    don't hold your breath on norminsd giving any specifics to back up his foolish bragging. nothing like being able to make empty claims anonymously, that's what makes the internet so great!

  • Report this Comment On December 13, 2008, at 6:11 AM, mark4beth wrote:

    The depressing thing about what I read here is the high school put downs from some of the posters. By all means, take legitimate issue with the opinions expressed by the author - fair play to him for putting himself out there for criticism - but let's try and use cogent arguments and avoid cheap shots that add nothing to the debate.

    I am certain that alternative energy is going to be a major event in the years to come, and I suspect that there will be tax breaks and incentives galore going forward - so maybe it would be interesting to get an MF take on the sector.

    The Japanese are ahead when it comes to gas-power alternatives - look at the Honda Clarity. What happened to GM's fuel cell? I remember their display at Disneyland years ago about fuel cell technology and yet they are still 3-4 years away from being able to release a production car - and at the luxury market at that. Can the US carmakers ever make up the gap between them and the Japanese, Koreans and Europeans? Not forgetting the surely inevitable emergence of the Chinese car industry.

    Which begs the question, is it right for the US government to bail them out? Keeping bad companies in business is surely not the American way?

  • Report this Comment On December 13, 2008, at 9:25 AM, keteringjimmy wrote:

    Re Pcola Jack

    Sorry to be a pedant but attention to detail and research is what is supposed to make the 'fool' the place to be - Jaguar isn't part of the 'Big 3. It's part of TATA an INDIAN conglomorate who are begging for a hand out from the BRITISH government. Personally, I agree with your conclusion, justify it on business grounds - or go bust (and Yes, I'm a Jag driver in the UK)

  • Report this Comment On December 13, 2008, at 10:03 AM, Martini69 wrote:

    Re: Tinkerbelle 123

    Take a look at AOB. Trades on the NYSE. Chinese company with low debt and huge cash. Great annualized revs and income. In the pharmaceutical (neutraceutical) field and sells to the Chinese market. Growth through acquisition. In my humble opinion it warrants a long term objective.

  • Report this Comment On December 13, 2008, at 10:18 AM, TEDATLMS2001 wrote:

    TED FIGGINS SAID THE FOOL IS RIGHT ON!!!!!!!!

  • Report this Comment On December 13, 2008, at 11:18 AM, texpro wrote:

    I think the author's point was that now all investments are on sale and that buyers should try to get the best value for their money.

    Hence now is a good time to purchase stocks that are obviously good but whose prices are down only because the general market is down.

    The only risk is that the market will never rise again.

    A speculative stock bears an addtional risk that the market for that companies product will never develop, the business model will fail, debt won't get renewed etc.

    The problem is identifying the stocks whose only risk is that the market will never rise.

  • Report this Comment On December 13, 2008, at 12:20 PM, briboe wrote:

    How about doomed financial advice sites you should avoid - The Motley Fool.

  • Report this Comment On December 13, 2008, at 12:30 PM, MWasserman1 wrote:

    Does anyone have knowledge of an individual or organization considering filing a class action suit against ??? re the "death" of Washington Mutual (WAMU)? Obviously I'm asking because of the quantiity of shares I own (from $24/sh down to $2/sh). I just can't believe all those WAMU shareholders at the time the US took WAMU over, are content with saying, "Oh well, I guess my investment in (what was formerly) the nation's largest S&L was truly worth 0." Thanks in advance to anyone with info.

  • Report this Comment On December 13, 2008, at 1:10 PM, ib4uok wrote:

    Why is it that every mag, or analist opinion, when ask what the top, reccomended stocks are, have different opinions? Don't most pundits have the same informarion to make there opinions from?

  • Report this Comment On December 14, 2008, at 1:52 PM, energyconcepts wrote:

    take note 45% up front tax incentives to green energy top this with 5% earnings.Energy concepts will soon be accepting investors we are developing our red herring now pull up puget sound energy co generation electricity schedual 91 these contracts are available across the U.S. 2mill. per sight on average each year follow the tax incentives and you are likely to do very well I am not sure when we will go public contact energy concepts through the fool if you would like to be in on the forming of the board of directors.Healthy production of clean energy really is good for the whole world and its future potential is limitless.

  • Report this Comment On December 15, 2008, at 12:15 AM, ufpspock wrote:

    MWasserman1:

    I find your question interesting. Can you be more specific with your issue? I understand that the value of the stock went down and that you would have like to have gotten more for it, but where I am confused is in which way do you see this situation as one where legal action might apply? For most of us out there investing, the whole idea is risk-vs-return, and that means that sometimes you lose money. Sometimes you get bad luck. I am aware that the government involvement is unusual, but I'm not sure exactly what aspect(s) you are looking at. Can you help me understand what basis there would be for legal action?

  • Report this Comment On December 15, 2008, at 11:53 AM, midwestcore wrote:

    heo,

    i think energy stocks is a great investment.

    at one time it was to expensive but now it is almost even with fossil fuel cost. it cost 9.5 cents per kwh to use elec from fossil fuel and it now only cost 10 cents for solar energy per kwh. that's only a half cent difference in cost and soon the solar cost will be even cheaper than fossil fuel. as for the big 3,

    you need to buy it cheap. i bought 5000 shares of ford at 1.85 per share. i bought 2500 shares of gm shares at 2.80 per share. i have done this twice with gm stock and made a killing both times. all you have to do is buy when it looks like there is going to be trouble getting the hand out.

    then the next day or even a couple hours maybe afterwards it goes rite back up because a new plan is being disscussed that will get them the hand out again. i don't think its very likely that the big three will go under since they are all the country has to employ the whole nation after considering all the outside companies that are making stuff for the big 3. there are more employee's outside of the car factories than there are in the car factory that are employed. all the other jobs that the country needs to employ its people have been sent outside of the US.

    that has never made sense to me that all our jobs get out sourced and then they expet the people that lost their jobs to buy the product that's being made in a different country. come on, where are they supposed to get the money to buy the cars or appliances that come from a different country if they don't have a job any more to make the money to buy them with. jobs do not magically appear once they have left the country.

  • Report this Comment On December 15, 2008, at 11:57 AM, Irishfox wrote:

    Hi All

    I'm only starting out guys, but I'd like to comment nonetheless. The MF Stock Advisor has recently recommended LDK (solar energy) and yet Mr Gibbons doesn't seem to rate them. LDK is up from $11.79 to $12.69 since the MF recommendation.

    However here's a word of warning. I started looking at solar energy stocks and discovered that the current technology based on Silicon Wafers is about to be replaced by thin-film technology which NanoSolar (a leading company in this field) are about to bring to market. The difference here being that your standard solar device will no longer be a rigid panel supplied in a given size, but one which comes on a roll (think sticky tape), and which you then stick to your roof (etcetera) to form whatever sized panel or panels you care to have. That's my simple take on it. See this YouTube link for more:

    http://www.youtube.com/watch?v=4riNlqZHCTQ

    I have no agenda here and besides NanoSolar is still not gone public yet. All this has made me think twice about buying LDK or its rivals, because NanoSolar appear to have a very new disruptive technology which will make the generation of Solar energy a lot less expensive than current technologies based on Silicon Wafers. There may be other rival companies with similar technolgy that I'm not aware of.

    Hope this helps you all.

    Irishfox

    Ireland.

  • Report this Comment On December 15, 2008, at 2:56 PM, MWasserman1 wrote:

    ufpspock, thanks for your inquiry.

    I'm not an attorney, so I'll admit ignorance from the start, but surely misrepresentation (lack of disclosure by a publicly traded company) at the very least should be considered. Until it ceased to exist -- by being acquired by regulators and then sold for ~$2B to JP Morgan on a Sunday -- WAMU was supposedly the largest S&L in the country (by deposits) and one of the largest home lenders as well. Here's my reasoning: When WAMU made loans it either sold them (in which case it received compensation and has NO loss); or it held and serviced the loans. In the latter example, even if they had made ALL 100% LTV loans (which of course was not the case) and ALL the homes they made loans on lost half their value -- which of course is not the case (my loan is with WAMU and is only 10% LTV!) -- they could still foreclose and recover half the original loan amounts. In conclusion, I would guess 10-20% of their portfolio was "under water"-- so the company should have been devalued by a similar amount -- not 100%. JP Morgan stock shot up 10% they day they (and the regulators) "stole" WAMU from it's shareholders. They got "lots of something for next to nothing." All their employees got nothing. I got nothing. Someone should do something.

  • Report this Comment On December 23, 2008, at 11:05 AM, ARJTurgot wrote:

    Back again, looking for guidance on short term capital gains.

    Bit of a problem because if you bought PLD, like I did, around the time this 'analysis' got written, you've doubled your money.

    I'll quit now; flogging this horse is getting boring.

  • Report this Comment On December 25, 2008, at 10:25 PM, kayakmastr wrote:

    Don't dump on solar. Its time will come. It is the only source that can supply energy in the amounts that will be needed in the future when fossil fuels run out. So what to do meanwhile, buy an alternative energy etf fund, don't gamble on particular companies being the leaders years from now.

  • Report this Comment On December 29, 2008, at 10:58 AM, LongTimeFool90 wrote:

    I have hear people pontificate for many years on on what is hot and what is not.

    In my experience pontification is like being Cliff Clavin from the sitcom cheers.

    It is better to remain silent and be thought a fool than to open one's mouth and remove all doubt. (Author debatable).

    Now with all of that being said, this site was started by a couple guy who just wanted to bring the investing thing down to the common mans level.

    They have told us to do our research.

    Those of you who jumped all over the poor guy who wrote this article shame on you.

    He gave an opinion and because it wasn't what YOU wanted to hear, you treat him like some sort of a heretic.

    To the guy who called the author a dolt I don't see you putting your precious opinion out here as an article for conjecture and thought.

    Nooo you can only ridicule and condem.

    In the statements about LDK, from I believe it was mr Ferrari, the banks period are in a huge cash crunch. Showing my ignorance of the solar industry and knowledge of power transmission, the people manufacturing the wafers have a great product (I think) but the "power generation industry" is 100 years behind in technology. The problem is transmission line loss and until we get rid of these backward thinking power company giants and get those cells into the hands of the common man there is no way the technology will work. You cant transmit power a long way with those things.

    OK enough. This is not an engineering forum for me to pontificate. LOL

    All I am trying to say is have an opinion let others have theirs, and don't lambaste someone just because they have an opinion contrary to yours.

    Don't try to hoodwink me with conjecture, dazzle me with fact!

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