Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, February 15, 2006:
How to pick stocks: There
are three broad ways of figuring future stock prices:
1. Fundamental analysis. Pick stocks with growing profits.
2. Momentum analysis. Pick stocks everybody is talking about. This year,
for example, there's been China, real and alternative energy, organic food,
3. Technical analysis. Pick stocks whose chart is favorable. The "bible"
is this 710-page book, which I finally started reading last night.
Throughout his extensive research, John Magee emphasized three principles:
1. Stock prices tend to move in trends.
2. Volume goes with the trends.
3. A trend, once established, tends to continue in force.
Magee urged investors to go with the trend, rather than trying to pick a bottom
or averaging down in a declining stock. Interestingly, he recommended short
positions as often as he did long positions. More as I read more.
What should Wall Street's analysts do? Why
do stock prices rise? Ask your friends. The answer is simple: More people are
buying the stock than selling it. My friend Ed used to work on Wall Street selling
brokerage services to big insitutions. The "incentive" was research.
Ed asked the company's analysts the same question. None answered correctly.
Ed then asked them "Why don't you simply get on the phone and ask big institutions
what they're buying. They'll all tell you because they love to talk." Ed
said there were two reasons his analysts didn't:
1. They were too busy with their spreadsheets and their models, i.e. their analysis.
2. Most analysts are too timid.
"Are you a daytrader? You should be an investor."
Time frames are the biggest issue I wrestle with. Especially lately. One of
my money managers, Private Capital Management in Naples, Florida, screwed up
in 2005, losing 0.48% of my money by making big investments in the dying
newspaper business. Stay with them or fire them? My immediate temptation was
to fire them. Yet I'd probably be wrong. From their inception in 1987 to 2004,
they showed an annualized net (that means after fees) of 20%. During
that time, their worst year was 2002, down 9.25%. In 2003, they came
roaring back with a 35% return. In 2004, they earned 18.73%. Patience
is a virtue I should perhaps acquire with managers.
Individual stocks are different. Patience doesn't work. When the air runs out
-- as it has done with Google, Whole Foods and Apple -- it's time to be out.
Fortunately it has not run out with some of my present momentum favorites --
Hana Biosciences (HBX), Insite Vision (ISV), Ormat (ORA) and Vistaprint (VPRT).
And the key is to find more.
are the classic pig in a poke? Ellen Hancock had no skills at IBM,
except climbing that ladder. She helped kill Exodus Communications, where word
was she developed a drinking problem. Now she's resurrected herself in something
called Acquicor Technology (soon to be traded as ACQU). Acquicor is politely
called a blank check story. Here's an excerpt from yesterday's Fortune
more bizarre by the day: From The New York
NEW YORK (FORTUNE)
- Everybody wants a piece of the Apple magic. Investors have clamored for
the stock, which has doubled in less than a year. Entrepreneurs have hopped
aboard the iPod gravy train by building add-ons whose sales mushroom as the
popular music player prospers. Now even Apple alumni who have nothing whatsoever
to do with the company's current success want in on the action.
Watch this week
or next for shares of a new company called Acquicor Technology to begin trading
on the American Stock Exchange under the ticker ACQU. Its founders are Gil
Amelio, briefly Apple's CEO in the mid-1990s; Ellen Hancock, his Apple lieutenant
and later CEO of Exodus Communications, which entered bankruptcy in 2001;
and Steve Wozniak, Apple's loveable co-founder who hasn't worked there in
a couple decades.
heard of Apple. Perhaps the names Amelio, Hancock and Wozniak ring a bell.
But never heard of Acquicor? Don't feel bad. It barely exists.
an example of a new kind of gift from investment bankers to eager public shareholders
called a SPAC, or special purpose acquisition company. Its less formal name
is a "blank check" company, a totally appropriate moniker because
if you buy its shares you're giving a blank check to its founders.
In this case,
those luminaries will be attempting to sprinkle a little Apple pixie dust
in the public markets. Amelio and team have been criss-crossing the country
on a strange mission. They're asking institutional investors to give them
$100 million so they can make an acquisition they can't yet identify.
the bizarre rules under which SPACs are created, the team can't talk to buyout
candidates until they've raised their cash. If all goes according to plan,
however, Acquicor will complete its offering this week and its shares will
trade publicly. Then it's got two years to spend most of the money or be forced
to give it back.
There are only
clues about what Acquicor is looking for. According to its offering document
filed with the Securities and Exchange Commission, Acquicor digs the idea
of convergence. It is focused "on businesses that develop or provide
technology-based products and services in the software, semiconductor, wired
and wireless networking, consumer multimedia and information technology-enabled
Its hook? These
kinds of companies will need "experienced leadership and growth capital"
to take advantage of the coming together of these segments.
certainly are experienced. They just don't have much background in buying
and running companies trying to take advantage of emerging market trends.
ran National Semiconductor but stayed at Apple for only 17 months. When he
left in 1997 it looked as if Apple might slip off the scene altogether.
Hancock is a
career IBMer who was one of many executives to preside over a high-flying
bubble-era company that ultimately became a money pit for investors.
he's never pretended to be much of a business guy. He is the group's technology
chief. But buying companies and adding "experienced leadership"
is very much a business proposition.
SPACs are serious
business, by the way. ThinkEquity, the San Francisco investment bank that
is shepherding Acquicor's deal, has counted 43 blank-check companies that
have raised a total of $2.6 billion in the last couple years. Their shares
are up an average of 8.3 percent, which doesn't say much as two years is too
little time for all but a handful to have even used their capital yet.
The Apple trio
might turn out to be the greatest technology acquisitions team ever. The investors
who give them a blank check for on-the-job training certainly will be watching
to find out.
Feb. 14 The 78-year-old lawyer shot by Vice President Dick Cheney in
a hunting accident over the weekend suffered a minor heart attack early Tuesday
caused by birdshot lodged in his heart, hospital officials in Texas said.
Harry M. Whittington, was moved back into the intensive care unit at Christus
Spohn Hospital in Corpus Christi, Tex., to be monitored for up to a week in
case the birdshot shifted or additional pellets in his body moved into other
organs, the officials said at a televised news conference. Dr. David Blanchard,
the emergency room chief, estimated that Mr. Whittington had more than 5
but "probably less than 150 to 200" pellets lodged in his
said that the hospital's cardiologists were optimistic that the metallic pellet
in Mr. Whittington's heart would not travel farther and that he would be able
to function normally. They said they did not consider the other pellets in
his body problematic, and they currently have no plans to remove them.
150 to 200 metal
pellets? Now I understand why the poor birds don't stand much of a chance.
Metal birdshot. When a shotgun is fired using a multiple pellet shotshell, the
pellets exit the barrel of the shotgun and begin to spread out into a pattern
that increases in diameter as the distance increases between the pellets and
the shotgun. Hence, you can't miss with a shotgun.
One health-care lobbyist chuckled: "It's not enough for the administration
to cut Medicare; now they're taking out seniors one by one."
From David Letterman,
+ "We can't get Bin Laden, but we nailed a 78-year-old attorney."
+ "Honestly, I don't know what all of the fuss is about. What's more American
than shooting your hunting buddy in the ass?"
From Jay Leno:
+ "When people found out he shot a lawyer, his popularity is now at 92%"
+ "After he shot the guy, he screamed, 'Anyone else want to call domestic
wire tapping illegal?'"
An old cowboy sat down at the bar and ordered a drink.
As he sat sipping
his drink, a young woman sat down next to him. She turned to the cowboy and
asked, "Are you a real cowboy?"
He replied, "Well,
I've spent my whole life, breaking colts, working cows, going to rodeos, fixing
fences, pulling calves, bailing hay, doctoring calves, cleaning my barn, fixing
flats, working on tractors, and feeding my dogs, so I guess I am a cowboy."
She said, "I'm
a lesbian. I spend my whole day thinking about women. As soon as I get up in
the morning, I think about women. When I shower, I think about women. When I
watch TV, I think about women. I even think about women when I eat. It seems
that everything makes me think of women."
The two sat sipping
in silence. A little while later, a man sat down on the other side of the old
cowboy and asked, "Are you a real cowboy?"
He replied, "I
always thought I was but I just found out I'm a lesbian.
+ Munich, the movie. A must-see. Click
+ Identity Theft precautions. Click
+ Dumb reasons we hold losing stocks. Click
+ How my private equity fund is doing. Click
+ Blackstone private equity funds. Click
+ Manhattan Pharmaceuticals: Click
+ NovaDel Biosciences appeals. Click
+ Hana Biosciences appeals. Click
+ All turned on by biotech. Click
+ Steve Jobs Commencement Address. The text is available:
Click here. The full audio is available. Click
+ The March of the Penguins, an exquisite movie. Click
+ When to sell stocks. Click
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
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