A great example of single stock risk

[germark]

Today I saw an article that PG&E stock price went down sharply due to a potential development in its bankruptcy proceeding.

3 years ago the stock was at $60
1 year ago it was at $47
Now it's at $8

Times like this I'm glad that I only invest index funds. I can easily imagine an individual investor buying PG&E because it is supposedly a "safe utility company".

For me I would gladly lose out on potential gains to avoid having a substantial amount of my assets in a catastrophic failure like this.

[Jack FFR1846]

Polaroid.

[J295]

Apple
Google
Microsoft
Amazon

[dbr]

Apple
Google
Microsoft
Amazon

Yep, risk is upside as well as downside. It can be very rewarding or brutally punishing.

[jeff1949]

Enron

[MN-Investor]

At the end of 2013 Linn Energy was 13% of our portfolio. In Dec 2013 we decided to get out of the majority of the single stocks we owned and adopt a more Boglehead philosophy for our investments. We sold our Linn Energy for $30.89/share. One year later it was trading at about $10/share. They declared bankruptcy in 2016. Thank you Bogleheads for advocating low expense ratio index funds!

[bgf]

Apple
Google
Microsoft
Amazon

Yep, risk is upside as well as downside. It can be very rewarding or brutally punishing.

true. and it can be many times more rewarding than punishing. You can't lose more than you put into PGE, but you made a lot more than what you put in to apple, google, microsoft, and amazon. its just that few people can hold on for that long through that much volatility.

[columbia]

Until things dramatically change: any Chinese stock.

[fposte]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

[StandingRock]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

[dbr]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

[JoeRetire]

Times like this I'm glad that I only invest index funds. I can easily imagine an individual investor buying PG&E because it is supposedly a "safe utility company".

Yup. They're all safe, until they aren't.

[anon_investor]

Enron

This is the reason you do not have your employer stock as you sole 401k investment... apparently many Enron employees did...

[fanmail]

General Electric

[BH+]

Valeant

[marcopolo]

Apple
Google
Microsoft
Amazon

Yep, risk is upside as well as downside. It can be very rewarding or brutally punishing.

Oh. I thought maybe he was predicting these stocks would be the next to crash and burn...

[barnaclebob]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

That thread on the contrarian investor was quite a read. Heres a news article on the developments since then:

https://www.nhbr.com/ex-gtat-ceo-settle ... pple-mess/

Seems like a similar pattern to Theranos. Over promise, then dig a deeper hole when it all starts to unravel. My jaw hit the floor during the Theranos documentary when they revealed their magical blood analysis box was a hugely complex mechanical device. Up until then I assumed it was some sort of spectroscopy analysis vs a mini version of a hundreds of independent and complicated blood lab processes.

[Mr.BB]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

I know someone who worked at Enron many years before the collapse. Had about $400,000 in company stock at the peak. Held onto it to the end. Eventually they said they received a final check for about $235.00

[MotoTrojan]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

If that’s the thread I’m thinking of, it was truly sobering to read.

[dkdoy]

Mallinckrodt

[rossington]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

[IowaFarmWife]

Gateway Computers

[retired@50]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Someone (or a group of individuals) owns the stock. Your statement about "anyone who invests in utilities would never go near PGE" has to be false, doesn't it? Regards,

[jeff1949]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

I know someone who worked at Enron many years before the collapse. Had about $400,000 in company stock at the peak. Held onto it to the end. Eventually they said they received a final check for about $235.00

He did much better than I did. Had about $125k at one time and they sent me a check for exactly one penny. I haven't cashed yet.

[rossington]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Someone (or a group of individuals) owns the stock. Your statement about "anyone who invests in utilities would never go near PGE" has to be false, doesn't it? Regards,

The point is the company has not been a good investment for anyone's hard earned money for a very long time. Much better utilities elsewhere.

[mtmingus]

Nektar Therapeutics

[McDougal]

CMGI...

[Tanelorn]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Right. I mean, you’ve got to really not be paying attention not to know PCG has been in bankruptcy all year, getting sued for billions for the deadly wildfires over the last few years, etc. there was plenty of time to sell at $20 instead of $7-8 recently, and there may be again if the company’s bankrupt plan is accepted over the rival creditors one (which the judge just allowed to be considered, prompting this selloff). The company’s plan, as far as I vaguely understand it, consists of hoping for a bailout and stiffing the victims legal fund in order to prop up the stock price for the executives.

[jrbdmb]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

My previous employer prohibited moving any money out of the company stock until you reached age 55. Since all matching 401K funds were paid in company stock, it wasn't hard to end up with a 401K portfolio with 50% company stock.

Thankfully those rules were changed after the Enron debacle.

[dbr]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

My previous employer prohibited moving any money out of the company stock until you reached age 55. Since all matching 401K funds were paid in company stock, it wasn't hard to end up with a 401K portfolio with 50% company stock.

Thankfully those rules were changed after the Enron debacle.

Yes, my company originally had the same rule and changed it. Fortunately that company was and is successful enough that many retirees with lifetimes of company contributions and masses of ESOP purchases over the years have lived handsomely on their portfolios. But it is only luck that stands between them and the poorhouse.

[jrbdmb]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Right. I mean, you’ve got to really not be paying attention not to know PCG has been in bankruptcy all year, getting sued for billions for the deadly wildfires over the last few years, etc. there was plenty of time to sell at $20 instead of $7-8 recently, and there may be again if the company’s bankrupt plan is accepted over the rival creditors one (which the judge just allowed to be considered, prompting this selloff). The company’s plan, as far as I vaguely understand it, consists of hoping for a bailout and stiffing the victims legal fund in order to prop up the stock price for the executives.

If this is all true and "well-known" why isn't PG&E already a penny stock? Enron, Valeant, and many others were also great stocks until they weren't.

[cheese_breath]

General Motors
WorldCom
Global Crossing

[singledigit12b]

I don't know that I have ever heard or seen any advice saying to invest in only one stock.

Not invest in nothing but one stock, but employee stock purchase plans and management stock option/RSU plans implicitly urge people to invest significantly in only one stock. Most employers don't suggest that it is mandatory advice to bail as soon as possible from these investments.

Enron, of course, is the poster child for the possible disaster lurking in such situations. Elsewhere there are employees who have done very well indeed piling away stock in their employer.

My previous employer prohibited moving any money out of the company stock until you reached age 55. Since all matching 401K funds were paid in company stock, it wasn't hard to end up with a 401K portfolio with 50% company stock.

Thankfully those rules were changed after the Enron debacle.

Before I retired my company ESOP was 70% of my NW. Was only permitted to sell 25% at age 55 while still employed. When I retired the first order of business was to sell most of it. I still have too much (10% of NW) in the stock all in capital gains I will sell gradually.

[RetiredArtist]

If a single stock is a large part of your portfolio, wouldn't you follow it in the news?
PG&E had a big gas line explosion in San Bruno in 2010, due to incompetence if not greed. I think this was an early warning to shareholders. This article in today's Chronicle reviews PG&E problems. It does not mention that after the explosion & fire, there was no way to turn off the gas that was feeding the fires. They burned for hours.

https://www.sfchronicle.com/business/ar ... 512194.php

Being overweight in a single stock in a very poorly run company enhances risk.

[fposte]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

If that’s the thread I’m thinking of, it was truly sobering to read.

I'm sure that's the one. It was chillingly memorable as the various members realized it was true that bankruptcy had been declared. There was one woman who had invested all her money for her disabled son's future with them and lost it all, because it seemed like a sure thing. (A corollary to single stock risk, perhaps, is a bubble all supporting the wisdom of single stock risk.)

[rossington]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Right. I mean, you’ve got to really not be paying attention not to know PCG has been in bankruptcy all year, getting sued for billions for the deadly wildfires over the last few years, etc. there was plenty of time to sell at $20 instead of $7-8 recently, and there may be again if the company’s bankrupt plan is accepted over the rival creditors one (which the judge just allowed to be considered, prompting this selloff). The company’s plan, as far as I vaguely understand it, consists of hoping for a bailout and stiffing the victims legal fund in order to prop up the stock price for the executives.

If this is all true and "well-known" why isn't PG&E already a penny stock? Enron, Valeant, and many others were also great stocks until they weren't.

Because: "the company provides natural gas and electric service to approximately 16 million people throughout a 70,000-square-mile service area in northern and central California". As a state regulated Public Utility with an enormous customer base it is obvious they can't just cease operations...some people see value in that fact. But given the company's extremely problematic situation (they also filed for bankruptcy in 2001) it has been a very high risk utility from an investment standpoint for many years.

[unclescrooge]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

Good one!

[Carol88888]

GE. Kodak JDS Uniphase Pets.com Sears J.C. Penney Worldcom

[Random Musings]

I recall that a reasonably small percentage of individual stocks drive the majority of long term returns in a given index. Hence, the odds are not in your favor to buy a single stock.

RM

[smectym]

I only have one large single stock position—also a utility! Gulp. Duke Energy

[Grt2bOutdoors]

I only have one large single stock position—also a utility! Gulp. Duke Energy

Depending on when you bought it, you’ve made money. The bought Cinergy and Pan Energy(renamed Spectra Energy) - the latter was subsequently sold to a Canadian company.

[Grt2bOutdoors]

Bear Stearns! Just ask Jim Cramer: https://youtu.be/o3FVBKic5Ek

[smectym]

I only have one large single stock position—also a utility! Gulp. Duke Energy

Depending on when you bought it, you’ve made money. The bought Cinergy and Pan Energy(renamed Spectra Energy) - the latter was subsequently sold to a Canadian company.

It’s a DRIP, I’ve had it forever. It’s becoming a large position has sort of snuck up on us

[MathIsMyWayr]

Nortel.

[Tanelorn]

To be honest, anyone who invests in utilities would never go near PG&E. It is in a hopeless situation in possibly the worst regulatory climate in the country. This is a well known fact and nothing new.

Right. I mean, you’ve got to really not be paying attention not to know PCG has been in bankruptcy all year, getting sued for billions for the deadly wildfires over the last few years, etc. there was plenty of time to sell at $20 instead of $7-8 recently, and there may be again if the company’s bankrupt plan is accepted over the rival creditors one (which the judge just allowed to be considered, prompting this selloff). The company’s plan, as far as I vaguely understand it, consists of hoping for a bailout and stiffing the victims legal fund in order to prop up the stock price for the executives.

If this is all true and "well-known" why isn't PG&E already a penny stock? Enron, Valeant, and many others were also great stocks until they weren't.

The company isn’t going away, the question is whether the politicians will decide to bail out the shareholders or just the debt holders by changing the rules for fire liability and/or setting up a bailout debt fund or similar. If the politics go one way, the stock will likely over double in value. If they go they the other way, probably it’s worth very little. This is not inconsistent with this information being widely known, and honestly, if it was not widely known to you, you don’t really have any business owning PCG stock. Well, you can do what you want of course but don’t complain if you’re “blindsided” by some unfavorable bankruptcy outcome.

[sambb]

AAPL. So glad I got in a long time ago and paid off my mortgage with the gains. iPhone is amazing device!

[zaboomafoozarg]

GTAT. People posted as they lost their life savings.

Edit: deleted link, because apparently the Contrarian Investor forum is no more. Dunno whether that's a comment on Contrarian Investing.

Here's a thread I posted here shortly after the GTAT bankruptcy happened. It had a few of the more noteworthy posts quoted from that thread.

[cheesepep]

I hate it when people cherry pick a single stock to prove their point. Yes, PG&E is a dead stock and there are many others such as Enron, etc. No one here (especially here) as advocated buying a single stock. Everyone has heard of diversification. Yes, buying the market is overall less risky than buying a single stock. That is not being debated here. Buying a single stock or a small portfolio of good stocks, as others have pointed out, can be even more rewarding.

[rasta]

yes, PG&E is a dead stock, just like others here that have been mentioned, like GE, Eastman Kodak, JC Penney, etc.
Yet the "own the whole market" index funds that are pumped on here rode these stocks all the way down along with thousands of other
dogs.

[mrspock]

...

Times like this I'm glad that I only invest index funds. I can easily imagine an individual investor buying PG&E because it is supposedly a "safe utility company".
...

I could not agree more, I’m so thankful I learned about this style of investing. My only regret is that I seem incapable of convincing friends/family to seriously consider it over the various high cost advisor driven approaches.