Westport Innovations Inc. (USA) (WPRT), MAKO Surgical Corp. (MAKO): Terminal or Turnaround?

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Warren Buffet’s investing style is to make big bets on a small number of stocks. He also likes to buy stocks that are ‘on sale’ and he will buy when the price falls, then buy more when the price falls further.

I have to admit, I’m no Buffet, but I do like to follow a similar strategy. I see Westport Innovations Inc. (USA) (NASDAQ:WPRT) as a business that is uniquely placed to make large gains as a sea change takes place in the transport industry. It’s one of my major strategic bets, and throughout this period of depressed price I have kept building my position.

The date that didn’t work out

When David Kuo of Motley Fool UK tipped online dating agency Cupid on a UK TV show, I started a position. Following accusations in the press that company employees were impersonating potential partners to lure prospective members, the shares fell by 60%.

As this was not a financial scandal, I held awaiting facts. An independent report has now cleared the company of fakery, but highlighted deficiencies in standards. The company promises to address these issues.

The share price has now recovered a little, and I am hopeful to eventually move into profit.

The failed operation

When MAKO Surgical Corp. (NASDAQ:MAKO) shares fell by 40% on a poor quarter, I saw a buying opportunity. Peter Lynch says that one of the silliest things that people say about stocks is, “If it’s gone down this much already it can’t go much lower”. Lynch was proved right again when it fell another 40% on the next quarter.

I put the position on hold and waited. Lately, the company has restructured the sales operation and has shown some signs of a business improvement. I have made a small addition to my position, hoping to gain as the price rises.

The bottom line

As is often in life, I think I’ve learned more from my failures than from my successes. In particular, don’t ignore the wise words of Peter Lynch!

To summarize my approach to a failing investment:

  • If the investment thesis is broken – sell
  • If the original reason to buy is intact – wait, evaluate and decide whether the business can recover
  • If the business passes the test, consider using the opportunity to add at a lower price
  • Keep monitoring the patient until normal health is restored
  • Always decide based on business fundamentals – not price movement

The article Terminal or Turnaround? originally appeared on Fool.com.

Ian Richards owns shares of MAKO Surgical , Westport Innovations, WisdomTree Investments (NASDAQ:WETF), and Cupid. The Motley Fool recommends MAKO Surgical , Westport Innovations, and WisdomTree Investments. The Motley Fool owns shares of Westport Innovations. Ian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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