How to lose money in the stock market without really trying

Buy high, sell low. Works every time. The other day I sold stock for $1800 that I had originally purchased for $12,000, and was happy to do it. Read on for the details!

Most of our "playground" investment portfolio (as opposed to the serious ones in retirement and college funds) is invested in renewable energy and energy efficiency-related company stocks. It's actually doing pretty well this year, up almost 85%. Of course, that doesn't quite make up for the 55% drop in 2008, but anyway... I'm fairly confident that these companies are doing things that are essential for the future of our nation and our world, so I'm happy to invest in them even when that investment ends up being at a loss. But Daystar Inc (DSTI) was a bit of a special case.

Back in 2005 I was corresponding with various people about different solar technologies, and one of them pointed me to this new company, Daystar, that was planning to make very lightweight (and supposedly inexpensive) thin-film solar modules using copper-indium-gallium-selenium (CIGS) as the material. The company was headed by a guy from the National Renewable Energy Lab (NREL) which I have a lot of respect for, and I knew some people who knew him, so it sounded like it could be a great success. They were building a fabrication facility in upstate New York, which sounded good to me too since I live in the state (though I wondered about the solar potential here) - plus the company was already publicly traded on the NASDAQ exchange with the DSTI symbol.

So, in October 2005 I bought 500 shares at $9.51 each. In December I bought another 500 at $9.34. It seemed like a good price - but it wasn't. The company failed to deliver on its original schedules, the researcher-CEO-founder was clearly not succeeding at commercializing his ideas, and new blood was brought in. It looked like they made a variety of bad decisions and he finally left the company completely, they started talking about silicon thin-film instead of CIGS thin-film technology, they gave up on the NY plant, and it was no longer anywhere close to what I'd originally invested in. I probably should have sold then; instead the stock price looked low compared to what I thought the company could do (other solar companies had been getting huge batches of investment money) and so I bought another 1000 shares at $2.72 in March 2008. Last year's stock market collapse brought things down further, but I thought this still looked like a bargain at $1.32 in January this year, so sucker that I am, I went for another 1000 shares.

And then it kept dropping - as low as $0.55, with warnings the company could go bankrupt. I finally realized I wasn't interested in holding this stock any more, and changed plans. Next time I saw it at a bit higher price - $0.70 or more perhaps, I was going to sell most of what I had. Just the other day an announcement came out that DSTI was merging with a silicon solar company (EPOD Solar) and the stock bounced high on the news - I noticed on one of my occasional stock ticker checks that it was up some 25% for the day, and looked into why. The proposed deal didn't make me feel any more motivated to continue holding the stock - so I watched it go up and seem to peak around $0.90, and sold 3000 of my 4000 shares then. At an 85% loss overall, but it could have been a 90% loss without watching for the spike. Anyway, I was happy that finally I'd been actually able to act on a real investment decision. Maybe I'll start making some good ones now.