Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Tuesday, July
21, 2009. Short notes:
Big bear Richard Russell is turning bullish. He writes yesterday:
...The two Dow
Jones Averages are within striking distance of their June highs. If, and I
emphasize IF, both Averages can close above their June highs, I will consider
the primary trend of the market as having turned bullish under Dow Theory.
All in all,
this has been one of the strangest and most difficult periods I've had to
deal with in recent years. I make no excuses. I have faithfully followed Dow
Theory from start to finish during the years 2008 and 2009. If the market
wants to be tricky and difficult, it just makes it that much harder for me
writing these daily sites. I've ignored the bullish action of my own PTI in
deference to Dow Theory.
... the Industrials
are just 29 points ABOVE their June 12 close, but the Transports are not quite
there yet. My PTI remains bullish, which suggests that in due time, the Transports
"should" confirm. If they do confirm the new high in the Industrials,
with my PTI bullish and the Dow Theory also bullish, it is obvious that I
must climb aboard the bull train.
+ Loving a
product is no reason to buy the company. Hating one is no reason to sell
it. I increasingly hate my BlackBerry. The iPhone is a 100% better phone. But
Research in Motion's stock skyrockets. Go figure. (I'm waiting to switch. There's
+ Eating late
at night is stupid. I did last night. I feel positively awful this morning.
loves STEC (which I had bought a little of) and has raised its guidance
to $45 from $30. It writes, "As a follow-up to a recent, 12-month, $28M
US military contract, STEC brought out the big gun today (checks suggest EMC),
and announced a $120M ZeusIOPS contract for 2H. Relative to our prior model
that included ~$60-$70M contribution from EMC, this news raises our model by
$50M. Looking ahead to '10, we now expect rev from EMC alone of >$250M, vs.
our old model for total ZeusIOPS rev of ~$300M. Thus, we are raising our '09/'10
EPS ests to $1.43/$2.22. Our call for $2/plus in EPS power in '10 now lacks
imagination, but with $2/sh-plus at hand in '10 (emphasis on "plus"),
we think STEC deserves a better multiple (20x). Reiterate STEC as our one, long-term,
secular pick." For the research report, click here.
Sachs: The Great American Bubble Machine. Remember the great
article on Goldman Sachs by Matt Taibbi. Rolling Stone finally posted the article
to their site. If you haven't read it (and you should), click here.
+ The summer is
not over. Deer ticks still abound. People are still getting Lyme Disease.
Please don't venture into the woods. Dangers lurk.
+ From Blackstone's
What We Got
Wrong: (1) We expected a normal recession, not a collapse; (2) We expected
tighter credit, not failure of our financial system; (3) We forgot some lessons
of the past; (4) We let the continuing ebullient activity around us undercut
our resolve; (5) We made too many new investments.
+ Professor Roubini's
predictions on the economy actually match older theories on buying stock before
the economy turns. Hence, through he predicts the end of the recession in December
2009 and slow 1% growth in 2010 and 2011, he does come across as somewhat bullish
on the stockmarket.
For his latest interview on CNBC -- the man loves cameras -- Click here.
+ BYDDF (Buiild
Your Dreams), the Chinese electric car company, is at new highs. Russell
writes, Having started back in 1995 as a rechargeable battery manufacturer BYD
has expanded quickly and now employs around 130,000 people via 11 factories
around the world, 8 of which are in China. The US operation is fairly small
at the moment although there are plans to increase this as and when the BYD
F3DM is introduced to the US market. There are many aspects of the business
which seem to have attracted Warren Buffett, including the electric vehicle
division, the man behind the business and ultimately the fact that he refused
Buffett's initial request of a 25% stake! There are few people in the world
who would readily turn down an investment in their company from Warren Buffett
and manage to negotiate him down to a much lower equity stake. This appears
to have been taken as a reflection of the confidence that Wang Chuan-Fu has
in his own ability and in his company. The revenue split for BYD in 2008 of
was $1.7 billion cellphones and components, $900,000 batteries, $1.3 billion
automobile and others accounted for $300,000 although it is fully expected that
the automobile operation, which is fundamentally electric cars and hybrid vehicles,
will significantly surpass all other areas of the business in the future.
By the way, get
on Google and click "Charlie Munger on BYD."
board of directors that works
Schwartz, Cohen and Ginsburg, were close friends since childhood.
They decided they'd go into business together.
"OK! I'll invest $100,000."
Cohen says he'll
put in $200,000.
"Alright, I'll put in $50."
Cohen says, "If
I'm putting in $200,000, I'll be the President and CEO of the corporation. Schwartz,
for your $100,000, you can be Vice President and CFO, and Ginsburg, for your
$50 you will be our Sexual Adviser."
asks Cohen, "What is a Sexual Adviser?"
"When we want your fucking advice, we'll ask for it."
do I come from?
girl asked her father: 'How did the human race appear?' The father answered,
'God made Adam and Eve; they had children; and so was all mankind made.'
Two days later
the girl asked her mother the same question. The mother answered, Many years
ago there were monkeys from which the human race evolved.'
The confused girl
returned to her father and said, 'Dad, how is it possible that you told me the
human race was created by God, and Mom said they developed from monkeys?'
The father answered,
'Well, Dear, it is very simple. I told you about my side of the family, and
your mother told you about hers.'
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
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