How You Can Get Rich With 4 Dumb Mistakes

I've written a lot of stupid things over the years.

Since I started with The Motley Fool in 1995, I've written nearly 10,000 articles. As a limb-venturing analyst, I take big swings from time to time, and sometimes, I whiff badly.

Tastes like crow
Here are some of my more regrettable calls over the years:

• "Do you think these guys know a thing or two about growing a company?" I wrote two years ago, after Jamba (Nasdaq: JMBA) went public with an impressive fleet of seasoned executives bent on growing the smoothie chain quickly. "I do."
• "Things will get interesting as Jones Soda (Nasdaq: JSDA) moves from being merely a star in the $500 million premium beverage market to trying its hand at landing a bit part in the $66 billion mainstream soft drink market," I wrote two years ago, after the edgy bottler expanded into canned product lines, taking on Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) head-on.
• "These are exciting times in the music industry," I wrote three years ago, praising Warner Music Group's (NYSE: WMG) digital initiatives. "Don't let the worrywarts tell you otherwise."
• "Something special is happening at Six Flags," I wrote in March 2006, weeks after the amusement-park operator's stock hit double digits for the first time in more than three years. Special? The regional chain filed for bankruptcy reorganization this year.

All four of these stocks are trading markedly lower today.

Source: Yahoo! Finance.

I can't run away from my mistakes. Even watching Jones Soda and Jamba rally sharply off their lows this year doesn't make the sting go away. I went out on limbs, and the branches cracked.

Humble pie with a cherry on top
If this self-effacing excursion feels like a ridiculously circuitous route towards a pat on the back, you're right. I'm willing to own up to my blunders -- and relish them, actually -- because there's a secret to getting over the misses: the long ball.

Baseball purists know that Hank Aaron hit 755 homers in his illustrious 23-season career. Few will tell you that he also struck out 1,383 times. He failed more often than not in touching all the bases. Do fans care? No. In one powerful swing, Aaron could change the course of a ball game.

Investing is the same way. It's not about the misses. It's about the slugging percentages.

"Diedrich wants to focus on its wholesale business, and that's a good place to be," I wrote two years ago, breaking down Diedrich Coffee's (Nasdaq: DDRX) quarterly report:

I got my wife a Keurig single-cup coffee maker for Christmas, and she's going through those Diedrich K-cups like candy. Yes, it's a pretty crowded niche -- with half a dozen rivals, like Green Mountain (Nasdaq: GMCR), in the K-cup space -- but it's a fast-growing market.

Diedrich and Green Mountain were trading at $3.85 and $12.58 at the time. Both stocks have roughly quintupled since then, with Green Mountain eventually becoming a recommendation for Motley Fool Rule Breakers newsletter service subscribers, after it acquired the Keurig business.

In other words, even if Jamba, Jones Soda, Warner Music, and Six Flags went to zero, a similar investment made in each of those four stocks and either Green Mountain or Diedrich would still be profitable today.

If you're sharp enough to snag a five-bagger, it gives you the flexibility to strike out four other times.

Just keep swinging
This isn't lip service. I have owned (and written about that ownership in) Netflix since October 2002, with a split-adjusted cost basis in the low single digits. The stock has been a 10-bagger for me. If I feared competition, I could have invested in the now-bankrupt Hollywood Entertainment and Movie Gallery chains -- several times over -- and still come out ahead.

In the end, our scorecard is smoking the market by an average of 19 percentage points per recommendation, because we're able to hit it out of the park from time to time. A fistful of winners can be more powerful than a bucketful of losers.

So bring on my next mistake. And the one after that. You don't have to get it right every time. All you have to do is make sure that when you're right, you're really right.

If you're curious to see which promising stocks Rule Breakers analysts think could be the next Baidu or Netflix, simply follow this link for 30 days of free access to our top stock recommendations.

This article was first published Aug. 29, 2009. It has been updated.

Longtime Fool contributor Rick Munarriz is off to the batting cages. He owns shares in Netflix. Green Mountain Coffee Roasters is a Rule Breakers recommendation. Netflix is a Stock Advisor pick. Coca-Cola is an Inside Value recommendation. PepsiCo and Coca-Cola are Income Investorselections. The Fool has a disclosure policy.