Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, February 10, 2006: Around
noon yesterday, someone pricked the "momentum" balloon and a bunch
of "hot" stocks -- including my beloved Whole Foods, crashed.
The market started the day by being disappointed with Whole Foods' 26% increase
in earnings on a 22% sales increase. For that, it dropped the stock $4. Then,
kapow, noon came and it dropped another $2.78.
This drop is way overdone. Unless it bounces strongly this morning, I'll
be in buying some more. Whole Foods is nicely profitable, and growing strongly.
Fortunately, we had some winners yesterday -- Ormat Technologies and
VistaPrint. Though momentum stocks, they continued to climb. On a value
basis, they're way overpriced.
SEC Probe Web Sites offering large returns for looking at ads: You
give them your money. They give you a 12% on your money each day. All you have
to do is to click a few sites. Trivial. Remember the old motto. If it's too
good to be true, it is. To read the Journal's piece, click
is your house worth? Go to www.Zillow.com.
Put your address in. Some of my friends swear by it. I'm skeptical. It couldn't
find either of my houses. It gave gross under-valuations for some of my friends'
Cut your energy consumption: Expensive
oil is not going away. It's time to think of ways to save. Thoughts for today:
Replace incandescent bulbs with fluorescent ones.
My wife still has not discovered my growing collection. 60 WATT fluorescents
use only 15 WATTs of electricity, don't burn hot and last for years.
That's a huge savings. Time
to install more of these:
They're cheap at
+ If you live in the country, install a
wood furnace. A friend did and hasn't used one ounce of oil this entire
For more on these, go to a recent column, click
+ Blow icynene
insulation into your house. Fiberglass leaks. Regardless of R-value, fiberglass
leaves gaps and seams around framing materials where air can get in and out.
This leads to huge energy loss. When warm outside air meets cool air-conditioned
inside air, or when heated inside air meets cold outside air, it condenses,
makes moisture buildup. Mold and mildew grow within the building cavity. Blow
icynene into your walls. The stuff expands, fills every space and then hardens.
This stuff is genuine magic. I've seen it in action. It's going into my new
house. Read about it, click
Icynene gets blown
in, fills all the holes, expands and hardens. When hard, it's rock hard. Make
sure your wires are in before you blow this stuff in. This stuff is final.
+ Drive less,
bike more. It's healthier to bike to the store. It's even easier to park.
noxious odors still appeal: Everyone and his
uncle still believe running a phone company is the most profitable business
ever invented. With Vonage coming public -- though it has never earned a nickel
of profit -- Forbes asks the question, "Is
running an Internet phone company a good business?"
the largest Internet phone company in the U.S., aims to convince investors
it is, announcing plans today to go public and raise up to $250 million. At
the same time, its prospectus provides a trove of new information about the
financial struggles of a phone company that relies on the Internet instead
of its own network to provide phone service.
In the three
years and three months since Vonage began offering service, it has proved
widely popular -- and wildly unprofitable. Over 1.4 million customers
have signed up; its subscriber rolls more than tripled last year alone. Cumulative
losses over the company's brief life: $310 million.
The bulk of
the company's loss comes from a massive marketing push. The company was so
aggressive that for most of last year, Vonage was the single biggest buyer
of online ads in the U.S., according to Nielsen//NetRatings. Yet even if Vonage
had never spent a dime on marketing, it still would have never turned a profit.
And Vonage can
hardly afford to cut its recruitment efforts. It costs the company $213
to win a new customer. Just to stay even, the company would have to replace
the quarter of its customer base that abandons its service every year. While
that rate of defections might seem worrisome, the company paints its "churn
rate" as an enviable statistic in its prospectus, calling its "loyal
customer base" one of its key strengths.
The most common
reason people leave the company is the complexity and dubious reliability
of its voice-over-Internet Protocol (or VoIP) service. Vonage warned investors
that its customers may experience lower call quality than they are used to
from traditional wireline telephone companies, including "static, echoes
and delays in transmissions [as well as] higher dropped-call rates."
that improving technology would lead to better quality and fewer defections,
there is no sign of that trend in the numbers. Vonage's customer defection
rate has not changed for the last two years. By relying on Internet lines
it doesn't control, Vonage is largely at the mercy of cable companies and
traditional phone companies to provide reliable, high-speed Internet connections.
data did hold out the hope that, as the company matures, its margins could
eventually prove substantial. A typical Vonage customer with one phone line
paid the company $26.63 per month last year. But because Vonage customers'
calls ride for free over their high-speed Internet connections, the direct
expense of providing that line was just $8.31, the company said.
But Vonage is
likely to have trouble sustaining an average price that high for long. While
VoIP is well cheaper than traditional phone service, dozens of competitors
promise to offer an array of new calling options, some of them absolutely
free. Comcast (CMCSA), Cox Communications and other big cable companies are
working on VoIP offerings of their own. Time Warner's ( TWX), America Online,
Google GOOG), Microsoft (MSFT) and Yahoo! (YHOO) have all launched VoIP-enabled
instant messaging services, or soon will. Smaller competitors mimicking Vonage's
business model also threaten to undercut its prices. Skype, recently acquired
by eBay (EBAY), already offers calls for free.
announced that company founder Jeffrey Citron will be stepping aside as chief
executive officer to make room for Michael Snyder. Snyder was the president
of ADT Security Services, a subsidiary of Tyco International (TYC), for the
past nine years. Citron will remain as chairman and chief strategist.
A company spokesman
did not immediately return calls for comment.
Q: How do you know when you are at an Orthodox
A:. The mother of the bride is pregnant.
Q: How do you
know when you are at a Conservative Jewish Wedding?
Answer. The bride is pregnant.
Q: How do you
know when you are at a Reform Jewish Wedding?
A: The rabbi is pregnant.
another tasteless old people joke:
After pigging-out on burritos at Taco-Bell the night before, an elderly couple
was attending church services. About halfway through she leans over and says,
" Boy, that Mexican food really gets to me. I just cut a silent fart, what
do you think I should do?"
He replies "Put
a new battery in your hearing aid."
+ Munich, the movie. A must-see. Click
+ Identity Theft precautions. Click
+ Dumb reasons we hold losing stocks. Click
+ How my private equity fund is doing. Click
+ Blackstone private equity funds. Click
+ Manhattan Pharmaceuticals: Click
+ NovaDel Biosciences appeals. Click
+ Hana Biosciences appeals. Click
+ All turned on by biotech. Click
+ Steve Jobs Commencement Address. The text is available:
Click here. The full audio is available. Click
+ The March of the Penguins, an exquisite movie. Click
+ When to sell stocks. Click
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,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from software
scanning the Internet for email addresses to spam. I have no role in choosing
the Google ads. Thus I cannot endorse any, though some look mighty interesting.
If you click on a link, Google may send me money. Please note I'm not suggesting
you do. That money, if there is any, may help pay Claire's law school tuition.
Read more about Google AdSense, click
here and here.