Newton's In Search Of The Perfect Investment. Technology Investor.
But I repeat: I sincerely
recommend reading Clarke's pieces in this issue of Atlantic Monthly.
8:30 AM Friday, January 21, 2005: Yesterday
I listened to pitches from companies trying to get me to invest my hard-earned
money in them. Some companies were public. Some companies were private. The
theme that emerged was how these companies were using today's technology
to run themselves better -- extract oil from erstwhile uneconomic places --
or find new businesses -- customer email marketing machines. This is really
the key to investing today. Don't find companies peddling raw technology.
Find companies peddling the raw technology in attractive packages to
It was touch and go there for a while: I
shorted AT&T (T) at $18.50. Then it promptly rose to nearly $20.
I couldn't figure why. My friends on Wall Street told me it had lots of assets
and was generating oodles of revenues. But I said, "It's in a dying
business. Its management is worse than hopeless. No one wants to, or will buy
it. It has no future." Fortunately, I was right. Yesterday it reported
crappy earnings and its stock dropped to close at $18.07, well on its way to
$15. It reported that its fourth quarter revenue declined by 10%. It's predicting
an even sharper revenue decline for 2005. Chairman and chief executive, the
visionless Dave Dorman commented in today's Wall Street Journal, "We're
not ready to call a bottom yet in this market."
One AT&T statistic I love: When I came into the telecom industry in 1969,
AT&T had a little over one million people. It ended 2004 with slightly
under 50,000. That's a 95% reduction. Amazing numbers. I'm staying
Reaction to Richard Clarke's piece yesterday:
Some people were saddened. Some reacted with bluster: "Discredited source.
Familiar issues. Pompous articles. Liberal magazine. Wouldnt recommend
to informed readers." To repeat: I didn't endorse Clarke's conclusion.
No one can, since they're a long-term prediction and no one can predict the
Click here for the long article.
Ten Years Later, Click here for interview with Clarke. Fatal
conclusions: Oil at $80 a barrel. Plummeting store-based retail sales. Booming
Internet retail sales. Huge drops in attendance at theme parks and Las Vegas
casinos and hotels. Bankruptcies for all the major airlines. Major boom in security
equipment and services.
To me, the major two implications of the Clarke piece were:
1. Stay short-term. Instead of looking to long-term holding of real estate,
I'm looking more to buying real estate which can be sold quickly, e.g. I'm looking
at a 28-apartment building in Williamsburg, Brooklyn, which I can fix up and
sell off quickly, condominium by condominium. That has a lot more appeal that
collecting rents for ten years.
2. Stay much in cash.
tried to figure investment implications. One emailed me "We can make
money from Richard Clarke's article IF we can identify the companies that will:
1. Make biometric scanners.
2. Bomb detection machines (GE just bought out the biggest one recently,remember
3. Fingerprint ID machines.
4. Radiation detectors for large scale areas.
5. Shipping container detectors
6. Wackenhut security Corp. now owned by UK company but largest security firm
7. Buy NYSE-CPV-$26/shr; Mkt Cap=$288Mil ; yield=6.8% is a REIT owner of prisons!
8. Buy: OTC-CSCQ-$2.96/shr.; Mkt Cap=$30Mil; yield=0 manages prisons for states."
latest biotech investment is Hana Biosciences (HNAB): I
like biotech because the payoffs are huge. I don't put much into them because
the path to payoff is rocky and long. Now that my shares (and others) are registered
-- that happened yesterday and caused yesterday's sharp share price drop --
I can tell you a little about Hana. First, the registration has dropped the
price to a much more affordable level. On a fully-diluted basis, Hana has 16.8
million shares outstanding. So at $3, market capitalization is about $50 million,
which is not high. Second, I have no intention of selling my shares for a long
time. So this is not a "pump and dump" scam. Here is information the
company sent me:
"Hana Biosciences (OTCBB: HNAB) is a South San Francisco based
biopharmaceutical company which acquires, develops, and commercializes innovative
products for the treatment of important unmet medical needs in cancer and immunological
diseases. Hana Biosciences has products with big potential markets and a great
management team that executes. A few of their milestones during 2004 include:
+ Built pipeline
acquiring and developing three oncology products-PT-523 for non-small cell lung
cancer, cervical cancer and acute lymphocytic leukima, IPdR for pancreatic,
colorectal, liver, and brain cancers, and Ondnasetron lingual spray (OLS) for
chemotherapy-induced nausea and vomiting
+ Completed two financings of $14 million and have $12 million in research grants.
+ Achieved a public listing through the completion of a shell merger with EMLR
resulting in our current over the counter listing OTC:HNAB
+ Experienced management team which has developed and commercialized leading
products in oncology.
development stage business model focuses on the gap between lab and clinic,
reducing risk. Hana's business model is tightly focused on acquiring novel,
late pre-clinical or early clinical oncology leads from academia and research
institutes. Most other companies are built around a one platform/one product
model. They start with science and move toward business. Hana, by contrast,
starts with actual product leads sourced from multiple oncology technology platforms.
The end result is that their business model will help Hana capture high valuation
multiples as they move compounds from lab to clinic to commercialization. In
2005, Hana anticipates advancing all three of our pipeline products:
+ PT-523: Complete
the current Phase I in solid tumors; and initiate a Phase I/II in non-small
cell lung cancer (NSCLC), and Phase II trials in cervical cancer and acute lymphocytic
+ Ondasetron Lingual Spray: Hana plans to initiate a human pharmacokinetic clinical
trial, then a pivotal bioequivalence clinical trial to enable a 505(b)2 registration.
In addition, they are planning Phase IV trials in adjuvant breast cancer.
+ IPdR: Hana plans to complete long term pre-clinical studies leading to an
IND filing to commence a Phase I clinical trial in pancreatic, colorectal and
liver cancers; and a Phase I/II clinical trial in glioblastoma multiforme.
Hana has an experienced
management team which has developed and commercialized leading, more than 1$
billion products in oncology:
+ Mark J. Ahn,
Ph.D., President and Chief Executive Officer, joined Hana from Genentech, Bristol-Myers
Squibb, and Amgen. As Vice President, Hematology at Genentech he led Rituxan
franchise to more than $1 billion in revenues.
+ Greg Berk, M.D. Vice President and Chief Medical Officer, joined Hana from
New York Presbyterian Hospital and Weill Medical College, Cornell University.
Served as a clinical investigator for many leading oncology products including
Gleevec, Avastin and Rituxan.
+ Stephanie Broome, PhD, Senior Director, Regultory, QA/QC, and Project Management
was previously with Bayhill Therapeutics, Inc, PRA International, Inc/CroMedica
Global, Merck Research Laboratories, SIBIA Neurosciences, and PowderJect Vaccines
+ Lin Pei, M.D., PhD, Director, Research, came from Tularik, Cedar Sinai/UCLA.
+ Russell Skibsted, Vice President and CFO, joined Hana following positions
at Asset Management Company, GE Capital, and Pinkerton.
+ Fred Vitale, Vice President, Business Development, joined Hana after distinguishing
himself at Genentech, Bristol-Myers Squibb, Amgen, and Miles."
investing book: When
I was young I took a course on speed reading. I never learned to read faster.
But I did learn you can "read" a book in 20 minutes if you actively
look for conclusions by disciplined skimming. This one is worth 30 minutes:
Some of the book's conclusions:
+ We're nearing a worldwide peak in oil production. There still be plenty of
oil in the ground, but it will become increasingly difficult and expensive to
keep pumping it out.
+ A key reason: Hubbert's law. M. King Hubbert, a geologist, predicted in the
1950s that oil production in a field peaks once half its oil has been extracted.
+ If you pick just one major oil company to invest in, it's Chevron Texaco.
+ More speculative is PetroChina, which Warren Buffett has a significant stake.
+ Don't even think about investing in oil futures. Too risky.
+ Berkshire Hathaway is wonderful.
There's a model portfolio, too. Buy the book to get it.
alert, again: A friend running a Windows PC opened an email attachment.
Two seconds later that was the end of a pleasant day. He couldn't start his
machine. He couldn't find his data, etc. etc. It took the expensive IT plumbers
hours to get his data off. Now, he has to reformat his entire hard disk and
start from scratch. Two lessons:
1. Don't open strange attachments -- even from friends, if you're running Windows.
2. Buy yourself an Apple. If you do the basics -- word processing, spreadsheets,
email, music and family photos, you'll do better with an Apple. And best of
all, you'll sleep at night.
Netflix is great. The stock
sucks. But the service sure is great. It's another one of those companies where
someone has put enormous thought and attention into designing beautiful, customer
friendly software. I like being able to pop a movie in where I want.
The Australian Tennis Open is on this weekend: The
tennis is great. Messrs. Federer and Roddick are playing beautifully.
A successful rancher died and left everything to his devoted wife.
She was a very good-looking woman, and determined to keep the ranch, but knew
very little about ranching, so she decided to place an ad in the newspaper for
a ranch hand.
Two men applied
for the job. One was gay and the other a drunk. She thought long and hard about
it, and when no one else applied she decided to hire the gay guy, figuring it
would be safer to have him around the house than the drunk.
He proved to be
a hard worker who put in long hours every day and knew a lot about ranching.
For weeks the two of them worked, and the ranch was doing very well. Then one
day, the rancher's widow said to the hired hand, "You have done a really
good job, and the ranch looks great. You should go into town and kick up your
heels." The hired hand readily agreed and went into town one Saturday night.
One o'clock came,
however, and he didn't return. Two o'clock, and no hired hand. He returned around
two thirty, and upon entering the room, he found the rancher's widow sitting
by the fireplace with a glass of wine, waiting for him. She quietly called him
over to her.
my blouse and take it off," she said. Trembling, he did as she directed.
"Now take off my boots." He did as she asked, ever so slowly. "Now
take off my socks." He removed each gently and placed them neatly by her
boots. "Now take off my skirt." He slowly unbuttoned it, constantly
watching her eyes in the fire light. "Now take off my bra." Again,
with trembling hands, he did as he was told and dropped it to the floor. "Now,"
she said, "take off my panties." By the light of the fire, he slowly
pulled them! down and off.
Then she looked
at him and said, "If you ever wear my clothes into town again, you're fired."
on that wonderful ocean cruise:
A guy went to his travel agent and tried to
book a two-week cruise for himself and his lady friend. The travel agent said
that all the ships were booked up and reservations were very tight at that moment,
but that he would see what he could do.
A couple of days
later, the travel agent phoned and said he could get them onto a three-day cruise.
The guy was disappointed that it was such a short cruise, but booked it . .
. and went to the drugstore to buy Dramamines and three condoms.
The next day,
the agent called back and reported that he now could book a five day cruise.
The guy said, "Great, I'll take it!" and returned to the same pharmacy
to buy two more Dramamines and two more condoms.
day, the travel agent called yet again, and said he was delighted that he could
offer them bookings on an eight-day cruise. The guy was elated and, and went
back to the drugstore. He asked for three more Dramamine and three more condoms.
looked sympathetically at him and said, "Look, I'm not trying to pry .
. . but, if it makes you sick, why do you keep doing it?"
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.