Bitcoin, page-214

Pay attention to the negative

Modesto may be a stock researcher now, but he learned about company fraud the hard way. When Sino-Forest was accused of fraud in 2011, the company stock tanked, but Modesto, then just a retail investor, bought in.

He thought he was getting a deal. Many institutional managers were still bullish on the stock, and he figured they must be right — after all, this short seller was relatively unknown at the time. That was a big mistake. The stock kept falling. He got out two months later, just before the company delisted from the Toronto Stock Exchange.

It was an embarrassing moment, but he learned a valuable lesson: Listen to the naysayers. Most stocks have one or two, if not more, analysts who have a negative rating on a company. Pay attentional in to what they have to say and see if anything stands out. Going negative isn't easy, he said, and many are going out on a limb to say what they really think.

It's your money and the buck stops with you. Do your research, and make sure you are comfortable with the company.

Richard Teitelbaum

AUTHOR

"Why are they so negative on the stock?" he asked. "Is there something there that you should have considered? In every market, there's a buy and a sell — you don't want to only look at positive information to back up a thesis."