Renewable Plastic

I’m an environmentalist and, as such, I hate plastic bags and all things plastic. Some years ago I ran across a small company that was “a leading manufacturer of proprietary biobased, sustainable bioplastics,” focused on renewable plastics, and winning various awards in Europe. So I plunked down a huge sum (for me) for some shares. Meanwhile, my job was getting highly pressured, my mother was dying, and I stopped watching my portfolio. I lost everything but $1.13. Big lesson: I watch my stocks all the time now. And I read and evaluate companies as well as I can, using spreadsheets and everything — with better results. — M.K., online

The Fool Responds: Like many investors, especially beginners, you got overly excited by a stock’s story and potential and didn’t spend enough time assessing its financials. Ideally, a company you invest in should be profitable, with little debt and increasing revenue and earnings. Many young and small companies aren’t at that level yet, so they can be extra risky. You need to keep an eye on your stock holdings, too. This one offered a few red flags over the years, such as two reverse stock splits — and hefty ones, at that. Shares split 1-for-40 in 2010, leaving anyone with 2,000 shares suddenly with only 50 shares. A 1-for-50 split in 2014 would have turned those 50 shares into just one. The company filed for bankruptcy protection in 2014, too.