Friday, December 28, 2007

Tom Gardner & SELECT COMFORT - "one of the worst stocks I've ever recommended."

I beg to differ on the last one - http://www.fool.com/investing/small-cap/2007/12/27/2-ways-to-profit-from-the-drop.aspx?source=ihptcltpa0000001

Excerpt:

Get rich or die tryin'
We all make investing mistakes. The key is not to make them again.

We've been dealing with this at our Motley Fool Hidden Gems small-cap investing service. Small caps have been among the hardest hit by the recent market swoon, and Fool co-founder Tom Gardner is coming to terms with what he called "one of the worst stocks I've ever recommended."

That stock is mattress-maker Select Comfort, and despite having a quality product, management has been slow to learn from its marketing mistakes and adapt to declining demand. That's putting it mildly for a stock that's down nearly 60% year to date, but in Tom's opinion, the problem is at the top.

Lose and learn
Tom's autopsy of this recommendation has yielded a four-point checklist that should help make us all better investors:

  1. Make sure the CEO at your companies has been pursuing mastery in a relevant industry for more than a decade and demonstrates daily passion for the business.
  2. Make sure the company is taking bold steps that match up with your beliefs about the company's potential. If you come to believe you can do a better job of running the company than its leadership, it's time to sell.
  3. Make sure your company has leadership that in every way demonstrates partnership with each of the constituents of its business -- customer, employee, and, perhaps most important, shareholder.
  4. Make sure you have a diversified portfolio to fall back on if you turn out to be wrong.

 

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