Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Friday, July 28, 2006: Investment
choices sitting on my desk:
1. Four startups. Some really neat products.
2. One private equity fund.
3. Two good hedge funds, both of whom should get more money.
4. Some good individual stocks.
The problem is due diligence. It takes time. Lots of it. And right now the sun
is shining and the weekend approaching...
agony of TriPath Imaging:
The ecstasy of Dr. Paul Sohmer. Dr. Sohmer is TriPath's boss. He
is avuncular, charming, and patient. He has worked miracles
with TriPath, taking an essentially dead company, endowing it with
products, giving it a profitable business, bringing in eight quarters of positive
cash flow, and building up $24 million in cash. TriPath's business is medical
imaging -- using sophisticated scanning equipment to detect cancer early on.
It's a booming business. The earlier you detect cancer, the faster you can do
something about it. Hence, you can save lives. There are several problems:
Medical imaging is not Viagra. It's neither glamorous or immediately rewarding.
Most people don't ask for it.
2. The Federal Drug Administration. The FDA is meant to quickly approve
useful, life-saving medical procedures. In essence, it's political, subject
to passing whims and winds. You can promise your shareholders when your new
plant will open, not when your fancy new thing will be approved by the FDA.
If you guess wrong, your shareholders will be pissed. Paul guessed wrong. Now
he's being ultraconservative in his new guesses and his shareholders are even
more pissed. It's hard to please Wall Street when you're guessing the FDA.
3. Legal problems. The TriPath is suing its largest competitor, Cytyc,
because it claims Cytyc infringed on TriPath's patents, which Cytyc probably
did. But Wall Street hates these legal problems. Cyctc's market cap is also
12 times bigger than TriPath's.
4. Guessing the future. When you run a little public company, you attract
a small handful of money managers who think they've discovered in you a way
to turn lead into gold. They put pressure on you to make sales and profit forecasts
you probably shouldn't. When you don't make their forecasts -- though by most
measures you're doing just fine -- they get pissed, badmouth you and/or dump
The good news is that TriPath is making excellent progress -- selling more and
inventing more. The bad news is that it's not growing as fast as many on Wall
Street would like; its FDA approvals on its next product are not predictable
(the forecast is for first half 2007, but some of us have our fingers crossed
for late 2006); and the patent suit against Cytyc is just beginning -- it may
drag on, or, if TriPath's stars align, it may end with a quick victory for TriPath.
We'll hear more next week.
confession: TriPath is the only stock I have held in violation of my inviolate
15% stop loss rule. I, too, am a Paul Sohmer junkie. His track record is impeccable
-- three companies built, three sold for oodles. I look at TriPath:
1. This is a company with great solid products (financed by earnings), earning
money, cash positive, growing and in a hot field. 50 million women each year
need diagnostic tests for cervical, ovarian and breast cancer.
2. There are presently 's a huge number of shorts -- 6% of the public float.
If those shorts ever scramble for cover, they'll easily bounce this thinly-traded
stock several points.
3. TriPath's largest customer, Quest Diagnostic has four million warrants expiring
in May 2007 at a price 50% higher than where TriPath's stock presently is. Quest
has a huge incentive to do more business with TriPath.
Generally, I, Harry Newton, see a stock price decline, panic and sell. I often
do this at the bottom. Looking at TriPath's chart, I see a "floor"
roughly where it is at present. I'm losing money on TriPath -- though I am getting
educated on Wall Street's roller coaster emotions. It's an expensive education.
For now, I'm holding. I cannot predict when my panic will kick in. I remain
a Paul Sohmer fan, committed emotionally to him -- though I recognize he is
a prisoner of the weird medical imaging world.
The best airline sites: For
For seat selection, SeatGuru.
Economists can't predict either. An early
morning story today from DowJones: "The Commerce Department will report
on second-quarter gross domestic product on Friday at 8:30 a.m. Eastern. Economists
are looking for a sharp slowdown from 5.6% annualized growth in the first quarter
to about 3.1% in the second quarter." The results came in this morning:
2.5%, according to the Commerce Department.
your Junk E-Mail filter: If you use Outlook
2003 for your email (and you really should), check its junk E-mail folder regularly,
you'll find important emails you want. Tell your friends to check theirs. They'll
find emails from you -- often emails with attachments (when emails without attachments
sail happily through).
If you find emails from people whose emails you want, right click on an email,
go to Junk email and add sender to safe sender list. That will mostly (not always)
work. These days I've taken to scanning my junk emails before I delete them.
I still find emails I want. Meantime, you should update your Outlook spam filter.
It's free. Go
Labs has some neat free software: You can get
a free RSS reader -- a real easy way of keeping up with breaking news from your
favorite web sites. You can get an online spreadsheet and some dashboard widgets
for your Mac. For more, click here.
gadget sites: Engadget,
and DPreview for reviews of
statistic? $25 million is spent each year on lap dances in Las Vegas.
woman: Wafa Sultan, a woman doctor, was raised as Muslim. She now
lives in America and practices psychiatry. Click
here. This interview has been viewed on the Internet more than a million
times. Speaking of the Holocaust, she said, "The Jews have come from the
tragedy and forced the world to respect them, with their knowledge, not with
their terror; with their work, not with their crying and yelling."
in the video, "We have not seen a single Jew blow himself up in a German
restaurant. We have not seen a single Jew destroy a church. We have not seen
a single Jew protest by killing people."
"Only the Muslims defend their beliefs by burning down churches, killing
people and destroying embassies. This path will not yield any results. The Muslims
must ask themselves what they can do for humankind, before they demand that
humankind respect them."
Dr. Sultan grew
up in a large traditional Muslim family in Banias, Syria, a small city on the
Mediterranean about a two-hour drive north of Beirut. Her father was a grain
trader and a devout Muslim, and she followed the faith's strictures into adulthood.
But, she said, her life changed in 1979 when she was a medical student at the
University of Aleppo, in northern Syria. At that time, the radical Muslim Brotherhood
was using terrorism to try to undermine the government of President Hafez al-Assad.
Gunmen of the Muslim Brotherhood burst into a classroom at the university and
killed her professor as she watched, she said.
hundreds of bullets into him, shouting, 'God is great!' " she said. "At
that point, I lost my trust in their god and began to question all our teachings.
It was the turning point of my life, and it has led me to this present point.
I had to leave. I had to look for another god." Please watch the video.
It's short. Click
happens in the desert:
A fleeing Hezbollah fighter, desperate for water, was plodding across the plains
of Lebanon when he saw something far off in the distance. Hoping to find water,
he walked toward the object, only to find a little old Jewish man at a small
stand selling neckties.
The Arab asked, "Do you have water?"
The old Jewish man replied, "I have no water. Would you like to buy a tie?
They are only $5.00."
The Arab shouted, "Idiot. I do not need an overpriced tie. I need water!
I should kill you, but I must find water first."
"O.K.," said the old Jew, "It does not matter that you do not
want to buy a tie and that you hate me. I will show you that I am bigger than
that. If you continue over that hill to the east for about two miles, you will
find a lovely restaurant. It has all the water you need. Shalom."
Muttering, the Hezbollah fighter staggered away over the hill. Several hours
later he staggered back, near collapse.
"What happened?" asked the old Jew.
Replied the fighter, "Your brother won't let me in without a tie."
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.