Like the products they produce, drug stocks can be exhilirating to own. Their growth can be fantastic and short-term gains are often through the roof. Unfortunately, these companies can also be incredibly risky. Investors learned that today when shares of Matrixx Initiatives imploded:
Buying and selling stocks is hard enough as it is. If you give me a company that makes paper (a relatively simple product) it will take me days or weeks to break down their balance sheet and thousands of other variables before I can decide whether it is a decent investment. And even after that the odds of that stock outperforming its industry peers are still pretty low. Give me a company that even doctors have trouble understanding and we’re talking about nothing more than full on gambling. Investors in Matrixx Initiatives found that out the hard way today….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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