WorldCom Fraud

There is an article in Value Walk about the Top Ten Investment Scams Ever. Number one is about WorldCom and Bernard Ebbers who caused investors to lose $100 billion. WorldCom was one of the few US investments I had. I basically lost the full $7,091.50 US$ I invested in this company in 1997.

The article said that the lesson to be learned is to ensure the business is not being creative with normal operating costs. This sort of fraud is not that easy to detect. All you can really look for is unusual changes.

However, before it went bankrupt the stock price did drop like a stone. The share price was $53.25 at the end of 1999, by the end of 2001 the share price was $14.43, by the end of 2002 the share price was $10.02, by the end of 2003 the share price was $0.16 and the end of 2004 the share price was $0.03.

If you invest, not all investments are going to work out. What is important is that overall you make money. When you invest in a company that does poorly, you can only lose what you have invested. If a company does well there is no limit to what you can earn.

This was also one of the few stocks I bought that did not have dividends. Now, except for a few short term holdings of mostly tech stocks buys, all my buys are dividend paying stocks and mostly dividend growth stocks.

I had another US Tech stock of Solectron Corp that is no longer on the US stock exchange that I lost money on. I also had Nokia as an ADR on the NYSE that I got a 2.32% per year return on between 1999 or 2006. However, I did make money on Blackberry which was RIM when I had it. I no longer do much US investing.

I would have done a lot better if I had stuck to Canadian dividend growth stocks. But I do not regret my investment past. I had fun and I learned a lot.

On my other blog I am today writing about Exchange Income Corp. (TSX-EIF, OTC-EIFZF) ... continue...

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