Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Tuesday, April 26, 2005: One
in a hundred. That's the ratio my real estate friends find. Look at 100 deals.
Say NO to 90+. Bid on five to eight. Succeed in one. It works with real estate
because it's not a perfect market. Real estate prices are not listed on a national
Internet-accessible market for everyone and his uncle to see. Someone selling
something cheap in a hurry can't alert the world to his bargain.
in a hundred also applies to
new startups. The good news is that new startups are coming out the woodwork
with increasing frequency. I'm looking at several this week. (My skills on saying
NO are proving most valuable.) One of the best things I've got going at present
is a small network of friends who, like me, have a little money to invest and
are always searching for that perfect investment. We're able to help each other.
Sample. We're looking at a specialty retailer which is raising $4 million. My
friend laid out a bunch of neat questions for the company: including:
+ Please share with me your rationale for the step-up in valuation.
+ Please send me historical and projected sales by store.
+ Please discuss why you believe the Company will be cash flow self financing
post $4 million raise.
+ Please discuss the Companys new store strategy and how it selects markets
and specific locations.
+ Are any of the store locations a mistake?
+ How has the Companys marketing plan changed since inception?
+ Who are the Directors and what control do they have over management?
+ What is your exit strategy?
+ What is the compensation program for management and Directors?
but not untypical of the work necessary to check out a potential investment.
timing sucked on Zimmer and Stryker. But my logic didn't. Remember
I recommended buying them one day. Then the next day, the government said it
was investigated their relationships with their doctor customers. Then the stock
plummeted. But it's since recovered. Last night Zimmer reported 70 cents a share,
up from 40 cents -- helped by strong knee implants. Heah.. My stocks can always
use a leg up.
real estate boom continues.
Six months ago my friend bought 242 acres, a slightly run-down house and a nice
barn for $2 million. Yesterday he agreed to sell it for $3 million. What's amazing:
1. He hadn't put
the property back on the market.
2. It's in upstate New York where we have not seen irrational exuberance.
His logic. He bought the house and barn for $1 million. He got an acre of land
for under $5,000. The going price for land (in smaller lots) in the neighborhood
is around $10,000. Thus he got a bargain. He actually figures the new buyer
also got a bargain.
The moral of this story: There are deals everywhere. By having cash, my friend
was able to grab the property quickly. The key is maintaining a deal flow. My
friend has great relationships with local brokers, who feed him handsome opportunities
-- but, in return, expect him to move quickly. Which he does.
on Cramer: I plead guilty. I
like Jim Cramer's new CNBC show, Mad Money, which runs daily at 6 PM. I TiVo
it, so I can watch it when I want to. Despite his irritating personality, he
remains the only TV show host, who actually knows what he's talking about. Last
night, he talked about three stockmarket booms:
The airplane makers. UAL has a deal with the government to get rid of some of
its pension liabilities. That means it will buy more planes from companies like
2. Oil. The Valero takeover reflects
3. Paid search. Cramer owns Yahoo! but was pushing his viewers into Google,
which he figures is cheap compared to Yahoo! He's probably right. But who has
the stomach for Google at $223, sporting a P/E ratio of 90?
I like this logic. I hope he's right. John
oil is not the problem, it's the solution, as converting to new energy sources
is a huge growth dynamic. The need for new and cheaper sources of energy will
compel all sorts of innovation and new invention. The steam engine was basically
developed to pump water out of coal mines, as England needed new forms of
energy to substitute for dwindling forests. Yet the collateral uses propelled
the British Empire to its peak of economic power. Think of the resources and
the money and the innovations that will come to play with the development
of a new energy paradigm for the world."
is the place to be: No question that China is the place to have some
money. I don't know how. But I know that with China's currency about to be upvalued,
there's a definite pop there. Latest: China is gearing up to sell cars to the
U.S. That will be neat.
Cockroach stock AIG must continue its slide:
There's too much bad, unusual stuff coming out regularly about the company.
Here's the latest. From today's New York Time,
International Group, the insurance giant under scrutiny for using transactions
to improve its financial condition, has uncovered at least $1 billion
more in accounting problems, people briefed on the company's investigation
said yesterday. But the number is fluid, the people said, and could ultimately
turn out to be higher as the investigation continues."
from today's Wall Street Journal:
report by lawyers for American International Group Inc. and its board raises
serious questions about the integrity of AIG's financial-reporting systems,
including checks and balances in the accounting process at the behemoth insurer,
according to people knowledgeable about the matter. The
report into the company's accounting indicates that recently retired Chairman
and Chief Executive Maurice R. "Hank" Greenberg and dismissed Chief
Financial Officer Howard I. Smith oversaw critical aspects of the company
without certain financial and accounting controls in place to oversee their
work, according to the knowledgeable people. The company's accounting has
been under scrutiny in recent months by multiple state and federal regulators.
Mr. Greenberg hasn't seen the draft report, according to one of his lawyers,
but "looks forward to addressing the issues." Mr. Smith's lawyer
couldn't be reached for comment late yesterday. The internal AIG report, more
than 150 pages long, doesn't contain a specific red flag, but points to various
ways that top management ran the company without controls, according to the
people familiar with it. The report's authors note that a few employees declined
to cooperate, leaving some gaps in the internal probe's findings, according
to one of the people familiar with it."
here's what the chart looks like. As I've written before, it will fall more.
best statistic: 23%
of all photocopier faults worldwide are caused by people sitting on them and
photocopying their rears.
Smell the roses department:
My dear friend Dan Good is on his early morning jog
in the desert of California's Coachella Valley. Writes Dan, "I
was mesmerized by the bright light from the full moon shinning down on desert
in early morning twilight. I had to snap the photo to share it with everyone.
Quite a humbling experience."
The Coachella Valley, California, 5:57 AM yesterday. Photo by Dan Good
CNBC is amusing: Squawk Box host Mark Haines had a guest yesterday
who delivered unsettling news. At the end of the presentation, Haines commented,
"I'm puzzled. Do I shoot
myself? Or do I shoot him?"
All about Passover, which we're in the middle of:
Passover is the eight day observance commemorating the freedom and
exodus of the Israelites (Jewish slaves) from Egypt during the reign of the
Pharaoh Ramses II. A time of family gatherings, songs, customs
and lavish meals called Seders, the story of Passover is retold through the
reading of the Haggadah. Passover begins on the 15th day of the Jewish month
of Nissan. As the Jewish day begins at sundown the night before, for the year
2005, the first night of Passover was April 23rd.
real story of Passover:
Nine year old Joey,
was asked by his mother what he had learned in Sunday school.
our teacher told us how God sent Moses behind enemy lines on a rescue mission
to lead the Israelites out of Egypt. When he got to the Red Sea, he had his
engineers build a pontoon bridge and all the people walked across safely. Then,
he used his walkie-talkie to radio headquarters for reinforcements. They sent
bombers to blow up the bridge and all the Israelites were saved."
is that really what your teacher taught you?" his mother asked.
Mom. But, if I told it the way the teacher did, you'd never believe it!"
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
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