When 'Buy What You Know' Doesn't Pay

4. Krispy Kreme Doughnuts(KKD Quote): If you read Jim Cramer's Confessions of a Street Addict, then you probably know Jim as someone who lived for a Krispy Kreme and a great stock idea. Unfortunately, the company could deliver only the former, not the latter.

Even though the "under new management" sign is hanging in Krispy Kreme's window, you have to wonder whether its business model is or ever was viable. Sales continue to decline. The baking business has always been tough. Dunkin Donuts has been handed from owner to owner for years with relatively little success. Just look at the history of Interstate Bakeries or Tasty Baking (TSTY Quote).

Bring a dozen Krispy Kremes to your next client meeting, but don't sell them on the stock. Nothing beats McDonald's (MCD Quote) when it comes to a food-service investment.

5. Alternative energy stocks: Let's reduce our dependence on fossil fuels and tell OPEC to stick it. It's the thought that counts. This entire asset class gets the great-product, bad-investment nod. We can use light, water, wind, steam or bovine excrement to generate energy for all I care. But even if Earth, Wind and Fire were to sing for us, it is highly unlikely that a stand-alone company is going to make you a dime in the alternative energy sector.

Maybe some big-cap companies like Archer Daniels Midland (ADM Quote) or a utility like FPL Group(FPL Quote) can hide their alternative energy losses under the rest of their profitable portfolios. Occasionally, a Johnny-come-lately alternative energy stock will go public and get investors all lathered up in the first few months of life, only to succumb eventually to traditional valuation techniques. The Pink Sheets and OTC bulletin boards are littered with the carcasses of alternative energy stocks.

Here is a Web site devoted to alternative energy stocks. Go ahead, knock yourself out, and try to find a stand-alone alternative energy investment. Over the long run, these are bad investments. In the meantime, think green, and invest in Exxon Mobil (XOM Quote).

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