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(HOKU) Hoku Scientific was a big mistake, keeping it is a money suicide… June 5, 2006

Posted by deminvest in Blogroll, HOKU Scientific, investment, My investing mistakes, stock I own, stocks.
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… which I will commit. I think I will keep HOKU. I will keep it because I am after all a proletarian investor. Unprofessional and sometimes I follow a wrong strategy even when I see it is wrong. I bought HOKU at $7 a month ago. I should sell it now at 4.2, but I can't admit to myself how wrong it was buying it. So I keep it hoping that for some magical reason it will go back at 7 and maybe arrive to 9.
HOKU will not.HOKU produces "Proton exchange membrane (PEM) fuel cells". Do you understand what it means? I don't. That should have been a very good reason not to buy. There is an investment rule that I usually follow: "Don't buy what you don't understand well". Anyway I think those membranes are used to produce Hydrogen fuel cells.

The main reason for buying HOKU was the fact that it is one of the few research high tech companies operating in the new energy sources business and making some earnings. I saw oil price go up, I like very much my battery operated electrical bicycle, I saw some earnings, and so I just threw $1000 into it.

HOKU last year had Revenue 5.51M and Earnings of 1.34M, which is very little for a company 68 M dollars expensive. The big problems are:

1) The company will probably not grow this year.

2) The company will probably not make many earnings this year.

3) Hoku's 32 y.o. Dustin M. Shindo shocked investors (myself included) saying he will open a new plant to build fuel cells for solar plants.

Solar plants have very little to do with what the company has been doing so far. Investing heavily in a domain totally new for small 20 employees HOKU, seems to me (and to the market which sent HOKU 40% low since I had the brilliant idea to buy it) nuts totally and a proof that even Dustin does not believe anymore in Hoku's core business, which was what in the first place convinced me and other desperate proletarian investors to put money in that sand box.

HOKU is the stock that convinced me to open a new category: my investing mistakes!

Comments»

1. len - June 13, 2006

do you ever compare risk and yields from other investment options like t-bills, government notes? what will that be compared to hoku?

2. deminvest - June 13, 2006

That is a very good point Len. I do not discuss about other investment options here.
I do have part of my savings in government notes, but on the average they have a record of giving lower yields that the stock market over years.
For me the stock market represents the economy which has nearly always been growing. Owning companies is a way to take some advantages of the capitalistic market, still being mainly a proletarian.
Also I do see it as a political issue.
I believe that nowadays large international corporations have power that sometimes makes them stronger than national governments , so I consider very important the fact that we the people hold part of that power trough shares.

3. len - June 14, 2006

thanks for giving me a good idea of the government notes options but what i really mean is the use of its yield mark as a turning point to divest or sell the non performing part of your portfolio or do you even have the time to make the decision when the price just slip fast way below before you even have a chance to reflect.

4. deminvest - June 14, 2006

Len, unfortunately I am not yet able to sell non performing parts of my Portfolio, like you correctly suggest.

That is definitely a mistake. I know, but I do hold non performing stocks forever, untill they go up 30% higher than the price at which I bought them in first place. Selling at lower prices just hurts my ego.

There are two factors that helped me perform not so bad even with this mistake:

1) I diversify: I have very many different stocks of companies operating in very different global marks. I usually invest $1000 on a new stock every month. I get that money from my savings, from dividends I collect from the high dividend stock I own and from the money I get back when I sell a stock that goes up 30%.

2) As a result of my investment strategies I don’t sell on lower markets. My ego stops me from selling at lost, so I authomatically don’t sell when the market is going down. In the long run I only sell well.

5. len - June 15, 2006

i understand what you mean when you say you want to hold on to the stocks even if it’s a bit non-performing but i think what you really meant is that you are still speculating that there is a chance of a turn around. i do not know what your decision tool is for determining the probability of a turn around and until what period of time to decide if it’s not good to hold on to the stock for a bit longer or say within a year or more or until u recoup 30%.

thanks for that pretty straight forward analysis am learning.

good luck!

6. deminvest - June 15, 2006

Len,

I think I will hold on it forever. Someday it will maybe rebound to give me that 30%, it will go broke or will be bought bought by a another company.

I can do that because I invest every month $1000 in a new stock. I get that amount by savings, by dividedends of high yield stock I own and by selling $1000 worth of whatever goes 30% up. I don’t need the $550 that Hoku is still worth to continue investing. I will just keep Hoku forever and put in the file of my mistakes. I try to learn from mitakes like Hoku and go on. Fortunately I do also have a few stock that did perform well.

7. len - June 16, 2006

thanks for the patience to share and explain that u “win more and u lose less” strategy.

8. deminvest - June 16, 2006

lol that is my hope at least!

What is sure is the fact that I will always be here on this blog to admit my mistakes. I will discuss them with you and with others that, just like you, can give me good advice so we can help each other to make better investment decisions 🙂

9. danielfrederickson - January 19, 2007

scroll to the bottom of your portfolio… did you ‘hold’ >HOKU

10. deminvest - January 22, 2007

Daniel, your comment made my day: I had to write a post on that.
https://deminvest.wordpress.com/2007/01/22/hoku-a-comment-by-danielfrederickson-that-made-my-day/

11. HOKU ROCKS - June 25, 2007

HAHAHAHAHAHAHA YOU SHOULD DELETE YOUR WEBSITE BEFORE PEOPLE FIND OUT HOW STUPID YOU ARE

12. deminvest - June 25, 2007

Why?
If I did deleted this, I’d be like the GURUS who want to show that they are and were always right.

It is good to remind myself and other investors how wrong I can be. I don’t ecourage my readers to invest like me and make my same mistakes. I only post to discuss my choices.

HOKU turned out to be a great company and proved me wrong: good for me and for other HOKU stock holders! Do you own some HOKUs too?


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