Investment Discipline and JA Solar

Where there's smoke... there's usually fire. That's one of my longstanding investment disciplines. Rather than waiting for all the details, I get rid of a stock when I first hear news of something that could potentially turn into a major issue. That is exactly what I did on 9/14 when news surfaced of quality issues from one of JA Solar's (JASO) suppliers. Rather than waiting for all the information to surface, I sold my shares right away to avoid a potential sell-off.

And of course, JASO is up 22% since I sold my shares last Friday. To make things worse, JASO just filed registration statements with the SEC for a US public offering which could fuel continued upward pressure on the stock as more US institutional investors will become eligible to hold it.

As some solace, I swapped my JASO shares for one of the Bulge Bracket Banks which is up 12% since I bought it. Also, I try to make myself feel better by remembering I recently sold another stock (toymaker RCRC) out of fear of surfacing lead based paint issues. RCRC is down 33% since I dumped it. I guess you win some and you lose some. Over the long run, I feel my discipline is a good one. However, this JASO thing really stings!