In Search of the Perfect Investment

 like this chart.

The chart and the story is from Business Insider and reads:

While the Nasdaq hovered at new highs on Monday, Amazon was marking a milestone of its own.

The company went public exactly 20 years ago as an unprofitable online bookstore that was just three years old.

Few investors could have foreseen that it would gain about 50,000% in the two decades after its initial public offering. One thousand dollars invested at the closing price on Amazon’s IPO day would be worth over $491,000 on Monday, based on the stock’s price in early trading.

That kind of return escaped even investors as seasoned as Warren Buffett, the Berkshire Hathaway CEO who recently said he was “too dumb to realize what was going to happen.” Amazon’s cloud-computing business has driven its growth and profitability, while its core retail business is threatening brands that were around long before.

It would have taken a rare kind of discipline to stick with the stock through its downturns. Shares have dropped by more than 10% and an average of 36% from their intrayear peak in each of the past 20 years, Michael Batnick, the director of research at Ritholtz Wealth Management, said in a January note.

Personally I think Amazon has just started. Bezos has the uncanny ability to create new opportunities out of thin air. His web site is still the best. But his future is in AWS, Amazon cloud services, in which he’s the biggest.

Google Translate is brilliant. But my son is even more brilliant.

Let’s start at the beginning. Peter Lynch says buy companies whose products and (services)  you love and avoid those you hate. I love Home Depot, but hate Loews. I love Amazon, but hate Best Buy. I love Netflix, but hate …Blockbuster… well they went broke. I love Square, but don’t know who they compete against… Maybe nobody?

This “stockpicking logic” has worked — at least recently.

I keep trying it. Let’s talk about Alibaba. It lets you buy things from China. Once upon a time, I bought a bunch of these:

These are the greatest travel accessory ever invented. I gave one to my son. He wants to give one to all his co-workers, since many travel often, like he does. I bought the cable extender from Radio Shack, which doesn’t make it any more. (Surprise. Surprise.) So I figured — Alibaba. Heck, the stock has done well in the past two years…

Maybe it will do well in the next two years? So what  better test than buy a bunch of the cable extenders from China through Alibaba? Friends tell me it works.

I registered, filled in all the forms…and came to several conclusions:

+ Their web site is awful. Awfully confusing.

+ People who live in China and work for Chinese cable makers don’t speak or write English very well. You can go round and round trying to get them to understand what you want — despite sending them a photo. My son Michael, the genius, suggested using Google Translate. Brilliant. Here’s what I produced. (I removed my address for this public blog.)

Alibaba is an amazingly diversified company, offering wholesaling and retailing and cloud computing. (Like Amazon and more.) Read what it does (courtesy Fidelity):

Alibaba Group Holding Limited, through its subsidiaries, operates as an online and mobile commerce company in the People’s Republic of China and internationally. It operates Taobao Marketplace, an online shopping destination; Tmall, a third-party platform for brands and retailers; Juhuasuan, a sales and marketing platform for flash sales; Alibaba.com, an online wholesale marketplace; Alitrip, an online travel booking platform; 1688.com, an online wholesale marketplace; and AliExpress, a consumer marketplace. The company also provides pay-for-performance and display marketing services through its Alimama marketing technology platform; Taobao Ad Network and Exchange (TANX), a real-time bidding online marketing exchange in China; and data management platform through TANX for marketers to execute their campaigns with proprietary and tailored data. In addition, it offers cloud computing services, including elastic computing, database, storage and content delivery network, large scale computing, security, and management and application services through its Alibaba Cloud Computing platform; Web hosting and domain name registration services; payment and escrow services; and develops and operates mobile Web browsers. The company provides its solutions primarily for businesses. The company has a strategic partnership with Mattel, Inc. Alibaba Group Holding Limited was founded in 1999 and is based in Hangzhou, the People’s Republic of China.

Baba is no cheap stock. But its earnings are growing…

I’m tempted to buy some today, despite the fact that Wall Street analysts are bearish on it.

Someone will soon buy  Trivago

I’m guessing that’s why they’re spending so much money advertising cheaper hotels — something Priceline (and others) have done for eons. It’s “hot”.

So is Mitek. This is what it does, courtesy Fidelity.

Mitek Systems, Inc. develops, markets, and sells mobile capture and identity verification software solutions for enterprise customers worldwide. The company applies its patented technology in image capture, correction, and intelligent data extraction in the mobile financial and business services markets. Its technology allows users to remotely deposit checks, open accounts, get insurance quotes, and pay bills, as well as verify their identity by taking pictures of various documents with their camera-equipped smartphones and tablets instead of using the device keyboard. The company offers Mobile Fill to pre-fill forms with personal data by simply snapping a picture of the consumer’s driver license, credit card, or other document; Mobile Verify, an identity verification solution that can be integrated into mobile apps, mobile Websites, and desktop applications; and Mobile Docs, a mobile document scanning solution. It also provides Mobile Deposit, a software that allows users to remotely deposit a check using their camera-equipped smartphones or tablets; and Commercial Mobile Deposit Capture product that integrates the same core technology as Mobile Deposit with additional capabilities specific to small and medium size businesses. The company markets and sells its solutions primarily to financial services, such as banks, credit unions, lenders, payments processers, card issuers, insurers, etc. through direct sales teams and channel partners. Mitek Systems, Inc. was founded in 1983 and is headquartered in San Diego, California.

My friends who are using it for remote check forwarding love it. It reminds me of Square (SQ), which has done well for us:

I like the software financial payment area. It’s another of those businesses that can scale easily using the cloud, like Amazon’s AWS.

Hedge Fund Managers Don’t Always Beat the Market, but They Still Make Billions

I’ve hammered in this column a zillion times: Wall Street is in this for the fees.

The highest fees are 2 and 20. Two percent of the money they manage for you and 20% of all the upside, if there is an upside.

This sort of structure (it can go higher) allowed the two top-earning hedge fund managers to make $1.6 billion and $1.4 billion last year.

The irony is that hedge fund managers, despite their lofty personal earnings, don’t often beat the market (i.e. the S&P 500) these days.

The New York Times writes about them today. Click here.

How oral health affect the rest of you.  This really good piece came from Men’s Journal.

To read it, click How oral health affects the rest of you.pdf 

Uber and Lyft revisited — from yesterday

My friend and reader, Richard Grigonis writes:

Down here in Boca Raton, Uber and Lyft are a little over a third the cost of taxis. The reason taxis were such a (formerly) great investment is that the owners weren’t really in the taxi business so much as they were in the vehicle leasing business. If a driver wanted to enjoy the “privilege” or working for a particular company, he needed to come up with a certain amount of money each month right off the bat… AND he had to share in the money he/she took in from fares. Uber flipped that around. It also eliminated the weak link in the chain of the taxi business, the dreaded dispatcher, the overstressed person who tells you that a taxi will be there in “ten or fifteen minutes” when in fact it will be half an hour, or never (they forgot about you until you call back). Dispatchers, not being based on advanced queueing theory and network flow algorithms, were inefficient at figuring out who to send where and when (and just plain incompetent, too, sometimes mis-hearing an address uttered by the would-be passenger). Moreover, they sometimes had “favorite drivers” who would give them kickbacks for additional business. Uber drivers have to speak English and maintain a certain rating and insurance. Uber also uses GPS, so you really know where your car is. Uber completely revamped the whole historically preposterous industry.

Harry Newton, whose Macys shorts are actually making a few shekels. They’re my only short. I won’t spend my unrealized profits today.