Holding On, Hopefully

So far the dumbest investing move I’ve made has been investing in Teva Pharmaceutical Industries, Israel’s largest drug manufacturer and a specialist in generic drugs, right before its recent freefall. (I lost around 50 percent of my $10,000 investment.)

Despite this, I decided to dig in and hold on. I still think it will eventually rebound, at least to more than I paid for it. I’m hoping the market overreacted, its new management will be effective and it will get some new medications approved. — M.L., online

The Fool Responds: Teva has certainly been struggling recently, but plenty of investors remain hopeful about its future, some because they believe that generic drugs will be taking market share from non-generics in the coming years. You shouldn’t be invested in the company, though, if you don’t believe in its future — and especially if there are other stocks that you believe will perform better from this point on. Don’t think about holding on just to gain back your losses. You can always do that via stocks in which you have more confidence.

Teva is still facing challenges, such as a heavy debt load due to acquisitions. It has also eliminated its dividend. On the other hand, it’s still generating a lot of cash and has cut costs significantly, in part by shrinking its workforce. One interesting development is that Warren Buffett’s company has recently been buying shares of Teva.