In Search of the Perfect Investment

Here’s why Apple is kicking tushy, and why its stock may still be cheap.

$500, here we come.

Good news: I haven’t yet upgraded to the new iPhone 4S. I will shortly. Meantime, the 4S is getting oodles of free ink: Every TV comedian (and their uncle) is asking Siri dumb questions. “Do you love me?” etc. Cramer went nuts on his relationship with Siri. Susan runs her life with Siri — from reminders to emails, etc. I have programmed Siri to tell her “Harry is a good husband.”

Annaly just paid me a handsome cash dividend. (Just as good as money.) Tracked over five years, NLY  looks pretty cheap today:

My friend thinks GLW is cheap.

Personally I don’t like catching falling knives. But this one has appeal — some neat new products, like Gorilla Glass, and a 2.4% dividend yield.

All one’s eggs in one basket. Several friends did extensive due diligence and invested all their money with Madoff feeder funds, undeveloped California land and other “sure things.” This is an old story. But I’ve heard it several times in recent days. They gave all their money to that one special place and bingo 2008 came, things fell apart and they lost it all. Now many are not living the lifestyle they had worked for so long at their day job.

In short, your due diligence — no matter how extensive — means nothing. It may only convince you to love your chosen investment even more.

You put your eggs in on basket when it’s your own business, under your control. Until then, you spread your hard-earned money around.

Diversification will limit your upside. But, more importantly, it will limit your downside. Capital preservation is what we care about.

Compression clothing is good. My son-in-law who travels extensively swears by his neck-to-toe compression clothing. He swears it makes him recover ultra-quickly from a long flight.He uses Skins. He tells me has the RY 400 top and bottom. Click here.

My friend the investment banker wears his compression socks every day. He says it makes him less tired.He says he bought them at an airport.

Wikipedia writes (but is too narrow),

The main benefits of compression sportswear is that it keeps the muscles warm to prevent muscle strain and fatigue, and wick sweat away from the body to prevent chafing and rashes. In addition, there is some evidence that compression shorts may enhance athletic performance. Compression sportswear also helps to keep undergarments in place, and for certain sports, like baseball and softball, come with padding at the hips to protect players from injuries due to sliding.

There are many types of compression garments that serve a similar function, such as compression t-shirts, socks, sleeves, and tights. Common brands are COMPRESSPORT, Nike, Under Armour, Skins, McDavid, Easton, Zensah, and Adidas.

Watch out for sandbox companies.It’s so easy to make cool software. It’s easy to fool dummy investors, who awe computers. Companies look for outside financing from angels or venture capitalists. Some people look for the money to grow their company, by selling product or service and ultimately making a profit. Some people look for the money so they can continue having fun writing software, creating hardware, and doing whatever cool neat new things amuse them. These are “sandbox” companies. They expect you, the investor, to throw them money so they can buy neat new toys for their sandbox. (Think children.)

They will never produce a real product for their customers or a profit for their stockholders. To be a successful investor, you need to identify sandbox companies and avoid them like the plague. I get a lot of proposals from inventors seeking money. My job, as investor in a sandbox company, is to provide the money, not question the use, or God Forbid, that they might actually focus their endeavors on creating a commercial product that will actually sell.

Most software startups are sandbox companies. Hint: If you like the product, but not the management, become non-executive chairman of the board and take charge. The last time I did that, I made 20 times on my money.

Read the Steve Jobs biography by Walter Isaacson. There you’ll find the classic technology company that did not ever want to become the classic sandbox company. Steve talked about making Apple become a great company that will last way beyond him. And he did. Today it’s the most valuable company in US. I’m pleased I own many great Apple products. Thank you Steve.

More Washington regulations? Friends have complained about recent, new, stupid regulations from Washington which are affecting their business — costing them money and time. I have some friends in senior administration positions. I’d like to send them as many examples as possible.

Do you have any irksome ones you’ve seen recently? Please send me details. I’m compiling a list to send to Washington.

The squeaky wheel gets attention: Your bank will reverse charges if you ask. Your broker will eke you out a few shares in the new, hot IPO. Your broker will find a cheap price on his muni bonds. Your real estate broker will cut his commission.  In short, everything these days is up for grabs.

Wonderful picture from the cover of this week’s Economist:

Latest favorite New Yorker cartoons:

Harry Newton who can’t think about investing while Djoko and Murray are playing their marathon five-set, five hour match. I want Murray to win, if only because he’s the underdog in this match.

Postscript: He didn’t. the final will be Nadal versus Djokovic. It will be great. It’s on Sunday morning: Live at 3:00 a.m. EDT on ESPN 2; Replay at 9:00 a.m. EDT on ESPN 2.