Under most circumstances, you should strive to condition yourself to seek out hated, cheap investments. Buying assets that are hated and cheap isn't just a sound strategy; it's probably the only sound strategy.
But the worst performing commodity investments of 2011 will likely be the worst performing commodity investments of 2012, 2013 and so on – forever.
That's because the commodity investments I'm talking about almost always goes bust the overwhelming majority of the time. And while I'm still a very bullish commodity investor, I avoid these commodity investments at all costs.
I'm talking about commodity investments that trade only on the Pink Sheets (.PK) or Over the Counter Bulletin Boards (.OTCBB). You can recognize these investments easily because they almost always have longer ticker symbols of 4 and sometimes 5 characters. And of course, they're always followed by either a .PK or .OTCBB.
If you learn nothing else from me, I hope you will learn this lesson now: most of these companies go broke. They have no earnings. They might not even have any assets, any property, sales, or even an office.
The best way that you can avoid losing money in stocks is to avoid these companies completely.
They're the fools gold of the investment world because they look like real companies, they have fancy literature, advertising, websites and they trade just like any other stock on any other real exchange.
To be clear, it's not just commodities investments that trade on the Pink Sheets. But it's typically the commodity investments that are among the worst of the pack. That's because being a tiny gold or oil explorer is hugely capital intensive. So these PK and OTCBB companies will continually issue shares because they need to access ever greater amounts of capital.
But I avoid all PK and OTCBB stocks – not just commodity related ones.
Ignoring these companies is easy – and it makes your investment decisions easier still. That's because when you ignore Pink Sheets companies, you immediately cut out thousands of stocks to decide from.
For a quick example of how poorly these companies perform, you can look at the winners and losers in the Dow Jones Industrial Average Index for 2011 with this nifty infographic from Forbes.
The biggest winners were IBM (NYSE: IBM) with a year to date performance of over 25% and Pfizer (NYSE: PFE), up 29%.
The biggest losers?
Bank of America (NYSE: BAC) down 60% and Alcoa (NYSE: AA) down 42% on the year.
The worst performing pink sheets for TODAY are:
Message Processing International (MPIN.PK) down 99.4%.
Tracking Corp. (TRKG.PK) down 98.33%.
These two companies will likely never trade again as they currently sell for minute fractions of one penny.
Every day, dozens of these companies go belly up. Eventually, all but a tiny minority go broke. Only about 1 in 3000 of these companies will get uplisted to a real exchange like the NYSE, Nasdaq or Amex.
So please, do me a favor – do yourself a favor, and just don't buy them!