Quick post... The pitfalls of growth stocks

So I made a big bet on Westport (WPRT) and thus far I have been wrong. LOL!  That's the risk you take when investing.  I moved in hard in the low 30's and have been punished by the short sellers.  Westport's earnings call for Q1 2012 on Tuesday was actually quite good in terms of progress.  I know they lost more money than they did vs. last year's quarter, but they are increasing sales quite nicely.  I think this stock has been taken down beyond what is right.  I know the nay sayers would argue that this company hasn't turned a profit in years, but you have to fuel the growth some how!  You need cash.. And enough cash is what they have.  If their wasn't progress than I would say the heck with this stock.  I believe Westport will surprise everyone especially the short sellers in the coming weeks.  I'm looking for a short squeeze in the near term.  There needs to be a catalyst to change the aggressive downward trend.  I'm confident WPRT's management will  have some good news to get the big fish investors back on board.  Plus a change needs to be made because I'm sick of losing money! 

I'm still a big Westport Innovations fan even if I lose a little cash in the short term.  I didn't expect this high growth engine to get cut in half in the past few months, but it happens to the best of them.  The thing with growth stocks is as followed...

When any negative news poses a threat to the growth of a fast growing company investors do not hesitate to turn on a once loved company.  The money will flow out like a huge hole in a boat and the short sellers will step in to accelerate the downturn.  When this happens the momentum takes over and stocks go down until the sellers are exhausted.  This is what happened to Westport.  Other growth companies have gone through the same thing.  Here are just a few stocks that had similar rapid downfalls.

Starbucks (SBUX)
Hansen Natural (MNST) AKA Monster Energy Drinks
NetFlix (NFLX)
Taser (TASR)

A few of the companies have rebounded nicely from when they plummeted, but rapid growth can't continue forever and neither can straight up stock prices.  It hurts to see your money slip through your hands from time to time, but the excitement of catching the next big trend is always worth the risk in my eyes.

Stay positive with WPRT.  Loyal shareholders will prevail.

Have a great night!

Clay-


Full Disclosure

Current Holdings:
Cosi Inc. (COSI)-Monster Portfolio
Caterpillar (CAT)
Westport Innovations (WPRT) Monster Portfolio
Kinder Morgan Energy Partners (KMP)

I'm not a licensed financial advisor. All recommendations is strictly my personal opinion and the information is intended for learning purposes only. Invest at your own risk!

SodaStream International (SODA)

Happy Thanksgiving!

I wasn’t going to talk about this company for another couple weeks, but the buzz for this stock is outrageous! The name of the company is SodaStream International (SODA).

SodaStream could be one of the hottest IPO’s for 2010. SODA initially went public back on Wednesday November 3rd and money has been pouring into this stock over the past few days. I first came across this company when Jim Cramer mentioned that SODA went public. Obviously, he has made me a lot of money with his stock picks and recommendations. I consider him one of the greatest investors of all time and the reason I enjoy investing in stocks. This stock is different! Jim mentioned SODA and Hansen Natural in the same sentence. That’s when I really became interested with SODA. Hansen Natural (HANS) is the maker of Monster Energy drinks and is one of greatest growth stocks of all time! I have never seen a stock move up as fast as Hansen Natural did in my 8 years of investing. Cramer said this company could be the next Hansen Natural. Of course this is pure speculation on Jim Cramer’s part, but if this product takes hold in the United States this stock will be very successful.

So what does SodaStream have to offer? SodaStream manufactures home beverage carbonation systems (AKA) soda makers. That’s right soda makers! Seems like a pretty easy concept. SODA offers more than just the soda maker, but everything that is needed to create your very own personalized drink. The products offered include the soda maker, flavors, bottles, and carbonators. I believe this product will catch on. Here are my reasons from the research that I have done.

1. It’s cheaper to make your own soda long term
2. It will help reduce the amount of aluminum and plastic consumption in the world (Go Green)
3. It’s healthier. From the companies home web page it states a drink has 1/3 less calories compared to the national brands.
4. It’s a simple process. Quick and Easy!
5. Soda stays carbonated for up to 2 weeks
6. Personalization of your own flavor and amount of carbonation will meet the needs of all consumers. (People are picky and making the drink to fit your personal preference is a plus)
7. Energy drinks. You can make your own. This one is my favorite since I drink a ton of Monster. I could take the difference in cost and invest the rest.

The main reason for potential success is SODA products allow for the creation of residual income. That means money will continue to come in over the lifetime of the soda maker. Companies that offer products that must be replenished are always great investments. Initially SODA will make a large amount of money off the soda makers and kits. Then repeat sales will continue with the flavors, carbonators, and accessories.  It's a glorified money making machine!

The stock currently closed yesterday at $41.21. On November 3rd the first day of trading the stock closed at $24.12. That’s a 70.8% return. It was trading in the 30’s a couple days ago and I believe it will pull back next week after they report their 3rd qtr earnings on Tuesday. I would hold off on buying this stock until after Tuesday. Tuesday will give an idea of how well this product is taking hold and the future earnings for this stock. Once earnings are established I can reevaluate the stock price to determine if it’s still a buy. If this stock has half the growth of Hansen Natural it will perform well over the next few years!

I originally heard about this company from Cramer, but I ran across this product while on the job. I took a field trip to a facility that my company works with on a daily basis and the gentlemen that oversees operations had a bottle full of soda. He mentioned he bought a soda maker and he loves it! He said it’s cheaper than store bought pop and his favorite flavor is root beer. I thought this was a great idea. I told my wife about it and said I may want a soda maker. A few weeks later SODA went public.  You never know when an investment idea may arise.  This was one of them!  On another positive note, yesterday I received the mail and I came across the Bed Bath & Beyond add for the week. I couldn’t believe it when I saw a soda maker.  I went crazy when I saw that!  I think this stock will be a huge money maker. Check it out for yourself! For more information visit

http://www.sodastreamusa.com/default.aspx

If you are willing to take some risk this could be the stock for you. This is the perfect opportunity for growth. I think I’m going to ask for a soda maker for Christmas!

That’s it for SODA! In closing I want to touch on the market in general.

Stocks have been performing very well and I like it! The economy is turning and the majority of companies are making money. 2011 should be a good year for stocks.  Keep buying your favorite stocks on pullbacks and sell a portion of your winners on up days like yesterday.

Have a great day! Enjoy the turkey.

Clay-

Monster Status (Stocks I like)

Apple (AAPL)
Caterpillar (CAT)
Weatherford International (WFT)
Westport Innovations (WPRT) up 5.16% yesterday