Investing Instincts

Before I became a Fool, I bought stock in Petsmart, the large chain of pet-supply superstores, because I liked its then-new billboard campaign. I thought the ads were cute. Three weeks later, the CEO announced the company was closing 25% of its stores, so I sold at a $3-per-share loss. The worst part is that now the stock is back up. Lesson learned: Don’t follow my gut instincts!

--L. Bethea, Nashville

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The Fool Responds: Gut instincts do play a role in investing. They can help you find promising companies to research further. Petsmart’s shares tripled in value from 1993 to 1996, but they’ve recently plummeted to all-time lows, in part because of slim profit margins, rising inventories and weaker-than-expected sales. Let your gut lead you to some cute puppies, but then inspect them closely to make sure they don’t have fleas.