Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, July 6, 2005: I
feel more positive about U.S. stocks. I buy Cramer's argument -- not Buy and Hold,
but Buy and Homework. That dictum means serious work several hours a week.
That work is figuring sectors that will be hot. My picks today include
organic food retailing (e.g. Whole Foods), biotech (e.g. Hana Biosciences, Manhattan
Pharma, Point Therapeutics and TriPath Imaging), water (e.g. Watts Water Technologies)
and joint replacements (e.g. Zimmer Holdings). More
sectors in coming days. Your ideas?
friends are in love with Jim Cramer and his noisy CNBC show, Mad Money.
They say they learn something every show. Last night was When to
Sell. His rules:
New serious competition. "Beware the one product companies." (I
wonder if this applies to Google? See below.)
2. Accounting shenanigans. I call them "Cockroach Stocks."
Avoid them like the plague. Sell them short, etc.
3. Overexpansion. You want to buy stores when they're regional before
they go national. Sell them when they've gone national. My best example is Wal-Mart,
which has gone national, compared with my favorite Whole Foods, which hasn't.
4. Being blindsided by the government. Cramer recommends reading the
front pages of the New York Times, Wall Street Journal and USA Today
for the big stories that will hurt companies. Says Cramer, "You don't
find these major stories in the business sections."
Selling is much harder than buying. I agree with Cramer. But I add one more
rule -- when your stock falls 15% from its peak, sell.
takes guts and energy to sell. My very capable friend in Australia, who manages
a hedge fund, emailed me:
is still performing strongly. However we feel it is getting top heavy. We
positioned our portfolio very defensively in June, expecting the market to
weaken and it has continued to rally. The market is now focussing on the next
round of profit results. At present we are invested 95% in cash. This
tells you we are bearish the market going forward and are focussed at present
on preserving capital for our clients. Last financial year we achieved
That email is specific to Australia which has its own special circumstances:
Rampant housing bubble which has now burst, thin economy with little immigration
and small population growth and seriously widening drought.
Google overpriced? Cramer thinks it's going to $350. My son, Michael
figures it's overpriced and is going lower:
friend Howard Anderson wrote this piece on Google for the latest issue of Network
Bill and the next Holy War
I have known
Bill Gates since his company was called Micro-Soft and its headquarters was
in Albuquerque, N.M. The man is an adrenaline junkie and nothing jump-starts
his heart more than a well-focused enemy. Gates needs an Enemy of the Day
the way you and I need water. He has built his company on a series of jihads,
identifying competitors that he can focus on, analyze and vanquish.
once said, "Sweet are the uses of adversity," and that was never
truer of anyone more than Brother Bill. Gates relishes tapping into his mental
powers to figure out a way to defeat a foe. Sometimes the enemy can be overcome
with technology, sometimes with clout, sometimes with guile, sometimes with
always win, although it may seem that way. But in every battle he fights,
Gates learns something he uses in the next, and rarely (hell, never) does
he make the same mistake twice.
Early on, the
enemy was CP/M, an operating system available on the first IBM PCs and the
industry standard at the time. Later, it was Novell, whose NetWare was the
industry standard for LAN operating systems - for a while. Then it was application
software, where Gates displaced WordPerfect, the market leader, with Word.
Lotus 123, the dominant spreadsheet company that IBM bought, became toast
next to Excel. Who can forget the OS/2 vs. Windows war with IBM? Let me know
if you are picking up a pattern here.
Gates' new enemy
is Google . Gates' first step is always one of cognition - "Oh my God,
we are vulnerable!" - and nothing excites him more than recognizing in
the nick of time that an enemy is at the gate. This is exactly what he did
with Netscape - first sound the alarm, then rally the troops, then plan short
stopgap measures until he could bring in the heavy cannon.
in and of itself, doesn't threaten Microsoft, but search technology as an
engine to enter more businesses does. If you view Google as a platform for
a variety of new services, then Google is a very real threat. With Netscape,
all Gates had to do was bundle Internet Explorer and offer it for free to
choke off Netscape's air supply. But with Google, what is Gates' solution
when the competitor's product is free, supported by advertising revenue and
outrageously profitable? This is the reason this battle is so intriguing to
as a series of concentric circles. The innermost circle, the Holy of Holies,
is the desktop. Microsoft has been invulnerable here for 20 years, but Google
is the first real threat. What is your default home page when you turn on
your computer? For many of us, it's Google.
that Microsoft today is already fighting wars on several fronts - XBox vs.
Sony, and Sony is winning; Microsoft vs. Linux, and Linux seems to be gaining;
Apple and music (iTunes); Firefox (free) vs. Internet Explorer; BlackBerry
- but all these are chump change compared with the Google Wars - with Gmail
battling Hotmail, Google Blogger going head-to-head with MSN Spaces, Google
PICASA fighting Microsoft's photo management and Google Hello facing off with
MSN Instant Messenger.
The key to Google
is that its funding is independent of desktop buyers - the company has figured
out how to get paid for "eyeballs." By using Google's automated,
discrete matching system, advertisers can find potential buyers. Yahoo does
the same thing, but Microsoft has never sold advertising, so it is a skill
not evident. So far, Microsoft has committed about $250 million in development
and advertising, but that might just be the opening gambit.
When we look
at Sun's Scott McNealy or Oracle 's Larry Ellison, we see successful executives
who every once in a while get tired of the game and take a physical or mental
time out. Not Gates. He has just what he wants: a new Holy War.
compensation has become totally absurd. The new head
of Morgan Stanley, John Mack, will get at least $23 million a year --
even if he fails. He could easily make $60 million in his first
two years as chairman and CEO.
money in Dubai: Reader Tim Jebara writes,
I opened an
account in the local stock market in Dubai, but could never trade. They were
always busy and would either not answer the phone, or pick it up and hang
it up. In protest I decided to close my account, and I had to run around in
circles just to have them send me my money back. There is so much money over
there they are swimming in it. You think leverage rates on stocks here are
high, there it easily goes up to five times your money. Also there
was recently an IPO, the amount of orders for the company equaled the entire
GDP of the United Arab Emirates. There are locals in the brokerages and
banks day trading, it is like the dot com bubble. They just keep trading,
and pushing it up.
- Part 1
Jacob, age 92, and Rebecca, age 89, living in Florida, are all excited
about their decision to get married. They go for a stroll to discuss the wedding,
and on the way they pass a drugstore. Jacob suggests they go in.
the man behind the counter: "Are you the owner?"
about to get married. Do you sell heart medication?"
course we do."
about medicine for circulation?"
for rheumatism and scoliosis?"
for memory problems, arthritis, and jaundice?"
a large variety. The works."
about vitamins, sleeping pills, Geritol, antidotes for Parkinson's disease?"
sell wheelchairs and walkers?"
speeds and sizes. Why are you asking these questions?"
like to use this store as our Bridal Registry."
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. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.