The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor/analyst Austin Smith and industrials editor/analyst Brendan Byrnes discuss topics around the investing world.

In today's edition, Austin and Brendan talk about a huge mistake investors keep making: chasing the buyout story. While it can be tempting to jump in on a stock when you see it popping 15% or more on buyout news, and potentially even more as companies pay a premium over market prices to own one company or another, stay away. The finance graveyard is littered with smashed portfolios that bought the rumors, only to never have them materialize. RadioShack and Akamai are two notable "could be buyout-candidate" stories that never materialized, and more recently Talbots and Avon tested investors' nerves when their suitors didn't quite work out.

Instead, you should look to invest in quality companies based on fundamentals. If you're looking for ideas, you can start with The Motley Fool's Top Stock for 2012. We've compiled a special free report outlining this company. In it, you'll discover the company hand-picked by our analysts that's positioned to be a titan of retail in the future. You can read more for free here.

Austin Smith and Brendan Byrnes have no positions in the stocks mentioned above. The Motley Fool owns shares of Google and RadioShack. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.