In Search of the Perfect Investment

It’s flattering, if exhausting. Checking out the explosion of private opportunities. The BIG opportunities are in dead (or almost dead) companies being rescued. There are specialty semi-conductor makers, bankrupt phone companies,  distress real estate, distress mortgages. Fortunes are being made in the rehabilitation business.

The potential returns are huge (and seductive).

So are the pitfalls (huge, not seductive):

First, there are gotchas. Things they don’t know about that come along and mess up the best laid plans of mice and men.

Second, there’s the management. They’re not yesterday’s “in-for-the-long-haul” type. They’re out to  fix it cosmetically and sell it, fast.

Third, you, as an investor, have no control. Most entrepreneurs are ego-maniacs and don’t like being suggested another path by the likes of you, or (worse) me.

The rule is — unless you’re one of the founders and know your fellow travelers intimately, stay away. As Todd says, “When in doubt, stay out.”

The biggest “control” is the ability to sell a listed security from one moment to another. You may lose five, ten, or God forbid, twenty percent. But you’ve lost a headache and you’re out. Do not underestimate the value of your peace of mind. You don’t have this with private companies.

Meantime, the good news is that the earnings of listed securities are rebounding strongly.

The earnings rebound means that the prices of our favorite stocks are still good value. 2011 looks like a good year for the stockmarket. Egypt is being shrugged off.

Global weather gone mad. Weirdo weather is affecting the world. I believe it’s because of the carbon we pump into the air. One day something will need to be done.

For the moment, the north of Australia, which recently got hit by gigantic flooding — more than the area of France and Germany combined — is about to be hit by its fiercest cyclone (what we call hurricane) ever. Maybe bigger than Katrina which devastated New Orleans. Cyclone Yasi will have winds of 186 mph and a wave of over 5 meters (16 plus feet). Hurricane Yasi is causing Australia to evacuate whole towns.

This is one of the disasters from the flooding.

Meantime, we in the NorthEast are getting our share of heavy snow and lousy weather. This winter is apparently New York’s snowiest ever.

I have no idea if this is true. But the story is truly delicious. Only in Germany.

Do not buy an iPad now. Wait. According to Gizmodo:

When it comes to iPods and iPhones, the lifecycle is easy to grok: Apple produces new models like clockwork. Every September, new iPods emerge, tweaked this way or that way. And every June, there’s a new iPhone. Apple hasn’t produced multiple generations of iPads for us to pinpoint precisely when the next version will emerge, but since it uses mobile guts like the iPhone—and those mobile guts advance technologically at the same speed—it’s reasonable to assume the iPad will see yearly updates just like the iPhone. Also, the steadily rising volume of tidbits about the next iPad indicate it’s coming soon, lining up with a yearly update cycle.

If you’re going to buy an iPad. or any gadget with a yearly release cycle, the best time to buy them for the maximum gadget newness-happiness quotient is within six months of their release. After the six-month mark, only throw down your card in a time of need—you dropped your iPhone in a toilet or your iPad was used as an awkward frisbee by your three-year-old cousin. And if we’re at the point we are now, a mere two months or so from a brand new model, do everything in your power to punt the purchase. Use a crappy flip phone. Borrow a friend’s Galaxy Tab. Just wait.

Photo lesson – 1. Never take a close-up picture of yourself (or anyone else) with an iPhone. The thing has an ultra-wide angle lens and makes your nose bulbous.

My nose couldn’t be this big?

Harry Newton who bought some Potash (POT) yesterday. He’s also very happy with SWZ. The Swiss may lack charm. But they certainly know how to make a buck. Once the Swiss Franc cost 20 cents. Now it will cost you over $1.

Meantime, Scott Udiine, exemplary money manager, emails this morning:

I really like Peabody Energy (BTU) in the energy space. Great fundamentals, already reported a good number and raised guidance slightly. The technicals are looking ready and I think this year, if the markets stay healthy, energy and ags are going to be the big winners.

I also like Blackrock (BLK) in the financial sector. One of our largest positions and I think can add 50-100 dollars worth of gains in the next 6-12 months.

Also like CF (own already) and POT (waiting for a new entry point). See above, as these 2 are the leaders in the ag space and look terrific.

I think Joy Global (JOYG) in the mining equipment space is an interesting one. Great fundies, terrific management and the chart is setting up nicely. In addition, BUCY just got bought by CAT, which makes JOYG the only pure play independent left. We own this one as well and will look to add more on constructive pullbacks.

Remember, we have stops in place on all of these just in case the markets do not cooperate. But if the markets stay healthy, I think these all can be big winners.