Motley Fool Rule Breaker

I just noticed that the Motley Fool Rule Breaker portfolio got smashed, really smashed since April. I really enjoy this newsletter’s picks, but I haven’t bought on any of their recommendations in a while, in fact I actually shorted their last recommendation, Suntech Power (STP)… I wish hadn’t covered so soon.

Anyway, this portfolio was performing at a jaw-dropping 33% around April, but during the Bernanke era the portfolio has now dropped to 8% versus the S&P’s 5%.

Here’s the picks from the last 3 months and their performance since recommendation:

• June- SunTech Power (STP): -19.78%
• June- Protein Design Labs (PDLI): -5.34%
• May- InterMunce (ITMN): -11.09%
• May- American Science Engineering (ASEI): -37.81%
• April- Powershares WilderHill Clean Energy (PBW): -3.54%
• April- Headwaters (HW): -32.13%

In defense though, the spirit of the “Rule Breaker” stocks is that they pick companies that are innovative and possibly the “next thing.” So, sometimes its a make or break deal. If you hold on long enough, you have a good chance of getting on a future market leading company before the herd. For example…

Best Pick: Vertex Pharamaceuticals (VRTX): +205%, picked February 2005!

Anyway, I’ve occassionally checked on the discussion boards and I’ve noticed there are not many people complaining about how bad these stocks have been. I give them a lot of props for hanging tight and sticking with the long run. Still, you have to think that if a respected newsletter like TMF is getting hammered, I’m pretty sure the majority of the “buy-and-hold” crowd are getting hit hard too. (If you are heavily invested in a “buy-and-hold” stock, I would recommend some sort of hedge, like buying puts in the stock or in the index) I believe those that are hanging on for the market to get back on track are the ones who are keeping this market together. With that in mind, I’ll be checking on the sentiment of the investor community at TMF, and when they start getting impatient, then I know we have a problem.