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Lessons From a Failed Investment

Updated from 7:03 a.m. EDT

By Guest Columnist Chris Fernandez of

It's been about two months now since I advocated selling your full position, if you had one, in SoundBite Communications (SDBT), a provider of on-demand customer contact solutions.

In those couple of months, I've had time to reflect upon what went wrong with my investment thesis in SoundBite, what I learned from the debacle, and how I can apply those lessons going forward.

My hope is that by sharing these insights with you, you can also strengthen your investing parameters and better understand what goes into my criteria for selecting companies for inclusion into the portfolio.

When I bought it, SoundBite was a cheap company, with great growth prospects in a small niche field. It had recently come public, and I had watched its stock price steadily decline, in spite of its seemingly impressive and improving fundamentals and wonderful business model.

So I did some digging around.

What I found out should have given me pause, but I was too focused and blinded by the "cheap" valuation and the fact that in its only quarter as a public company, SoundBite beat and raised guidance to such a degree as to seem like an unbelievably cheap stock compared with any comparables available at the time.

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This article was written by a member of the Stockpickr community, Chris Fernandez. Fernandez is the founder and CEO of, a Web site dedicated to the micro-cap and small-cap stock universe.

Stock recommendations and comments presented on are solely those of the members quoted. They do not represent the opinions of on whether to buy, sell or hold shares of a particular stock. Members should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal or corporate ownership, may influence or factor into a member's stock analysis or opinion. All members are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance. Furthermore, does not guarantee the accuracy or completeness of information on the site, nor does assume any liability for any loss that may result from reliance by any person upon any such information or recommendations. Such information recommendations are for general information only.

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