Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Wednesday, January 31, 2007: I
emailed my favorite hedge fund manager. "What's hot?"
He emailed back, "Me. I'm on the treadmill. Exercise is more important
than making money."
He's right. Good health keeps you alive longer so you can make more stupid investment
decisions. (Not him, me.) My tennis elbow is 90% better. Benign neglect and
changing my backhand have worked. I'm back to playing every day.
Think of investing
as a circle. Start with identifying an investment. That's the hard part. Most
of us are presented with too few options to choose, so we get to choose from
a list of second-bests. Before you choose you have to identify. Yesterday I
wrote about my favorite office building real estate syndicator raising another
fund. Only two readers emailed to ask "Who's the fund? Can I get in?"
One reader will receive the papers today and I bet will subscribe a little.
Meantime, he's sending me something he does, which seems interesting. Identifying
is often not through the conventional Wall Street sources -- broker, financial
adviser, etc. Those guys are always limited to what their boss -- the BIG financial
institution employing them -- is pushing. And it's usually something the principals
of the firm don't want to buy themselves. (This is cynical, I know.)
Then there's due
diligence. Checking on your chosen investment. Most investors are lazy. Cramer
figures an hour a week with every stock you own is the minimum attention you
should give it. He's right. I'm not sure you can ever do sufficient due diligence.
The key seems to be to check in places the company doesn't give you. The management
of my favorite real estate fund talks about checking 100 potential properties
before bidding on maybe 10, to finally end up with one bought. Most of us are
too lazy to follow the 1 in a 100 rule. But we should.
More on the circle
Icahn runs an "activist" hedge fund:
He finds companies with lousy management, but great potential. He
buys a big chunk of stock, writes a "White Paper" explaining what
the management should be doing and then seeks a seat on the board for
himself or one of his people. He doesn't own sufficient stock to control the
company. He'd need 51%. He may have only 5% or less. But he seeks to make enough
noise that he drives management nuts, so they either listen to his ideas or
buy his stock back at a handsome profit -- just to get rid of him. This strategy
has been so successful that, according to Icahn, his hedge fund has earned an
average of 40% a year for eons.
Icahn revealed he'd bought 1.4% of Motorola's shares and said he plans to seek
a seat on the board. After his announcement, Motorola shares jumped 7%,
giving Icahn an instant handsome profit. Motorola shares have not done well
Icahn is bright and articulate. I heard him speak recently. He makes a great
standup comedian. He's very funny. He tells great stories about his activist
adventures. He also makes no secret of how awful he thinks management is. In
a recent interview with Avenue magazine, Icahn said that CEOs are often
absolutely the wrong guys to be running things and warned that,
without greater accountability for corporate executives, eventually well
have morons running everything. I heard him use the word "moron"
several times. He uses the financial press well. I'd hate to be management that
he identified publicly as "morons." The intimidation is heavy.
Is Motorola worth buying because of Icahn? Could you think of 20 things Motorola
could do to improve its profitability? Simply cutting expenses by 6.8% in the
quarter to December 31, 2006 alone would have doubled operating income.
He wants Motorola to spend all its $11.2 billion of cash to repurchase its shares
(including his, obviously). Motorola's shares have dropped 30% since mid-October.
So , the answer is Yes and Yes. And that's why the stock bounced 7% yesterday.
Blair is a hoot: A blog on the New York
Times recently carried this note on Blair in Davos, Switzerland::
two-story outhouse says it all:
For Tony Blair,
it was a valedictory Davos moment his final appearance at the World
Economic Forum as Britains prime minister after almost 10 years in office
(but probably not his last time at the conference). Despite his poor ratings
and limited political shelf-life at home, Blair still packed the auditorium
with listeners Saturday as he addressed three main issues: climate change,
trade and Africa.
He seemed to
want to go out with a blend of vision and humor. Mr. Blair has said he will
hand over political power before September but has not said when. And when
he stands down, the betting is that he will seek a big international role,
becoming a super-statesman in the manner of former United States President
address with asides, Mr. Blair seemed to confirm that ambition. I look
forward to coming back in future years and telling other leaders where they
went wrong, he said as he opened his speech.
As Mr. Blair
intended, that got a laugh, and it was not his only effort to leaven his mostly
earnest, almost evangelical, look at global problems with humor. A questioner
remarked that, if he had not been a politician, he would have been a cleric.
The remark drew acclaim from the audience. I know what that generous
applause is, because many of you wish I had been a cleric, Mr. Blair
tone, reminiscent of Mr. Clintons delivery, extended to his remark about
the travails of making tough decisions. My ambition now is to please
some of the people some of the time, Mr. Blair said.
In his address,
Mr. Blair also ranged over what he described as the need for the reform of
global institutions. But he still did not say where, in that world, he saw
his own post-prime-ministerial niche.
He was asked,
though, about how he perceived his own identity. He replied that he had been
born in Scotland of English and Irish parents. So I have always been
Giving a further
clue as to his innermost self, Mr. Blair said the only leader he had ever
met who inspired what he called body envy was the California governor,
Law of Mechanical Repair
After your hands become coated with grease, your nose will begin to itch.
Law of the
Any tool, when dropped, will roll to the least accessible corner.
Law of Probability
The probability of being watched is directly proportional to the stupidity
of your act.
Law of the
If you dial a wrong number, you never get a busy signal or voice mail.
Law of the
If you tell the boss you were late for work because you had a flat tire,
the very next morning you will have a flat tire.
Law of Close
The probability of meeting someone you know increases dramatically when
you are with someone you don't want to be seen with.
Law of Logical
Anything is possible if you don't know what you are talking about.
If the shoe fits, it's ugly and the wife won't like it.
The law of
your favorite product
As soon as you find a product that you really like, they will stop making it.
If you don't feel well, make an appointment to go to the doctor. By the
time you get there you'll feel better.
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 .
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