Ironically, I ended my last newsletter with this: Barring any unforeseen world events, I am feeling pretty excited about our prospects in 2011. We’ve shown patience with a number of companies and now believe that we will strike gold with one or more of our names. This is not just wishful thinking but based on the notion that their work has been in preparation for success. (Ha!)
Well, since then, we’re facing… the Mideast unrest (3 months ago, how many knew or cared where Tunisia was?), the horror in Japan, European debt crisis – there’s always something! Despite these, my premise still holds regarding the potential for some of our investments. The macro environment drives the markets, yet the micro world (where we live), is where the financial difference is made.
An update on UniPixel (UNXL). I had dinner with management 2 weeks ago at the Roth conference in southern California. They are on track with their fingerprint resistant films (FPR) and their film for touch panel displays (UniBoss). Expect to hear some exciting news over the next few months. There was a very positive buzz surrounding them at the conference.
Wall Street is selling Main Street on the belief that experts can consistently time the market and make accurate predictions of when to buy and sell. They can’t. No one can – not professional economists, Nobel laureates, etc. Even T. Boone Pickens recently abandoned his wind energy investments because he thought the price of natural gas would remain high. I strongly support his plan to retrofit all commercial trucks to run on natural gas, though.
Why are experts (along with nonexperts) so bad at making predictions? As previously alluded to, the world is a messy, complex place with countless intervening variables and confounding factors, which we are not equipped to evaluate. Who could have predicted the countless mid-east uprisings or the devastation in Japan? When I lectured early in my career, I used an example of an enormous pulley system with countless arms to describe the macro world. Pull on one lever, and countless things could happen. For instance, the Japanese crisis could imply that the Japanese government might be net sellers of US treasuries vs. traditional buyers to help fund reconstruction.
Because of uncertainty, never put your eggs in one basket and keep cash available. As much as I like the prospects for UNXL, the truth is that we never know what’s around the bend. I know that no other company has a scratch-resistant, as well as FPR resistant film available today. I know that their copper infused film is unique, extremely valuable to the right companies, and that the market for this film approximates $14 billion/year. But I could not possibly know everything that may be in development. There are a lot of garages out there. So, we take our shots with current information and make reasonable projections. It’s my job to seek out companies, make the investments, temper my enthusiasm, and not bet the farm.
Studies show that it takes people an average of just three observations to think they’ve found a pattern. This could be fatal for investing. Though it might seem obvious, simply forcing yourself to think more before drawing a conclusion is highly effective. Nobody likes to be wrong, and we will often go to extraordinary lengths to convince ourselves that we aren’t. But it’s much easier to disprove an idea than to prove it. The best way to build credibility for an idea? – Struggle to disprove it.
Remember that investing is based on probability. Investing is not an “X, therefore Y” exercise. Nothing we do is so absolute, and we shouldn’t try to make it so. Our valuation hinges on a lot of probabilities but we’ve made sure that the odds are stacked firmly in our favor. And that’s all good investing is: If we make bets with probabilities stacked in our favor over and over again, we are going to make some money.
Where’s the Beef?…
The bull run may be faltering, but cows are enjoying quite a moment. Cattle futures surged to new records recently. This excitement is now spilling over to hogs! I wonder if salmon burgers can produce the same sizzle on the grill this summer?
Speaking of salmon, I’m more of a fish than a meat guy. I’ve taken high dosages of omega-3s for more than a decade now. But there’s nothing like fresh. So what’s best – Fresh? Frozen? Wild? Farmed? If you are not trolling for tonight’s dinner, choose fish labeled “frozen at sea,” which means it was flash-frozen before it could begin to spoil. It will be as flavorful as fresh fish – and cost less. As for wild vs. farmed, go wild; Fish that roam the ocean usually contain more omegas and are also free of the antibiotics used to keep farmed fish disease-free.
Please note the $100 deduction on your next billing invoice. I have done this with the intent to provide both the incentive and the means for you to make a donation to a Japanese Relief Fund of your choice. I hope that you will join me in this important effort. I am using an organization that I’ve been involved with for several years – www.savethechildren.org (Japan Earthquake Tsunami Children Emergency Fund)
If you like: a small government, a relatively large military, low taxes and limited regulation…. why not move to a country that has these things? Try Pakistan, for example!
May your Spring season be invigorating!
Goldberg Capital Management is an investment adviser registered with the State of CT Department of Banking. This Newsletter and its contents are for informational and educational purposes only. You alone will need to evaluate the merits and risks associated with the use of the information provided herein. Although this Newsletter may provide information relating to approaches to investing or types of securities and other investments you might wish to buy or sell, no information provided in this Newsletter is intended or should be construed as an investment recommendation or endorsement from Goldberg Capital Management. Please remember that past performance is no guarantee of future results.