FAQ/Knowledgebase: May 2015

Thanks again, as always, to Neil for his incredible energy and work in editing all this for me and for the board.


Saul’s Investing Discussions FAQ/Knowledgebase

This document pulls together key passages from Saul’s board posts and organizes them by topic. Immediately below is an index of the posts by post number, should you desire to go back and read the original posts in their entirety. Following that is a section on each topic with selected passages. Passages that apply to multiple topics are duplicated under each respective topic section.

Note that some of the passages have been edited in minor ways before inclusion in this document.

Added to the FAQ this Month

Posts 7143, 7156, 7427, 7435, and 7768. These are marked as (New!) in the index and topic sections.

Post Index

About This Board: 2913, 5735
Saul’s Historical Results: 20, 4
General Approach and Philosophy: 5, 6, 7, 27, 40, 18, 1366, 3115, 3218, 1401, 1433, 435, 1315, 1368, 2151, 2350, 2387, 3943, 3946, 4025, 4037, 4830, 6092, 6131
Evaluating an Individual Company: 6, 1234, 5, 3115, 2003, 2011, 2165, 1416, 1451, 2537, 3619, 3924, 3930, 3943, 3946, 4568, 4830, 5305, 5794, 6951, 7143 (New!), 7427 (New!), 7435 (New!), 7768 (New!)
GAAP vs. Non-GAAP: 197, 985, 6, 970, 4680, 5606
Prospecting for Companies: 120, 122
Investing Ethically: 6636
Portfolio Management: 6, 5, 50, 64, 114, 18, 21, 22, 51, 52, 383, 78, 907, 964, 1392, 1438, 2110, 1129, 41, 435, 1416, 4, 3313, 4065, 4665, 5305, 5320, 5392, 5532, 6972
Benchmarks and Financial Indexes: 5
Thoughts on Multibaggers: 7, 63, 4
Calculating Portfolio Returns: 26
Buying: 5, 78, 1007, 1146, 1160, 1164, 21, 2350, 2387, 2898, 4665, 4830, 6156, 7156 (New!)
Price Anchoring: 40, 18, 5, 78, 71, 4517, 4807
Selling: 7, 50, 27, 64, 40, 21, 5, 18, 51, 52, 78, 838, 3218, 907, 964, 1392, 1401, 1433, 1438, 71, 1417, 2151, 2489, 3867, 3858, 4065, 4807, 4517, 5305, 5320, 5392, 5532
Dips and Downturns: 1129, 1295, 1380, 2332, 1297, 2405, 1285, 3313, 3508, 3689, 3867, 3858, 3968, 6552
Dividends: 2110
Insider Trading: 5056, 6556
Professionally Managed Money: 5, 8, 17, 79
Secondary Stock Offerings: 2207
Graphing: 2003, 5, 2893, 2112
Teaching Investing to Kids: 1075, 3119
Investment Primer: 84, 677
Board Basics: 2450, 2460, 2794

## About This Board

  • I visualize the board as a tool for people improve their investing skills, to share information and ideas, to learn how to choose stocks for themselves, and to learn how to invest intelligently. I certainly expect people to make their own investing decisions and not to try to copy every stock I have, although it’s nice when others on the board are interested in some of the same stocks as I am because we have great discussions about them. Please remember to make your own decisions about what you buy and sell, and feel free to disagree with me as I certainly make bad purchases at times. The only thing I have ever guaranteed is that I make mistakes at times and that everything I buy doesn’t go up. [Post 2913]

  • Now if anyone actually wants to learn to invest the way I have done, the way to do it isn’t for you to just blindly copy the stocks I invest in, but to learn the method, which I have explained at length, and learn how to find the stocks for yourself, and find out what part of it suits your personality and financial situation. I’m an old guy and may not be around much longer. If you are just following the stocks I’ve chosen, what will you do when I’m gone? It’s best to learn how to do it yourself! – Hell, I’ve never considered my stocks to be the best possible ones to invest in. They are just the ones I’ve found. Consider my information about them as one of the sources of information you use, but if you find a better stock somewhere else, go for it! And please let me know so that I can evaluate it for myself as a possibility. That’s what the board is about. Discussion of investing and stocks, not how my portfolio does for the next six or twelve months. [Post 5735]

## Saul’s Historical Results

  • Annual Results since 2000:
    2000 - 19.4%
    2001 - 46.9%
    2002 - 19.7%
    2003 - 124.5%
    2004 - 16.7%
    2005 - 15.6%
    2006 - 8.6%
    2007 - 22.5%
    2008 - (-62.5%)
    2009 - 110.7%
    2010 - 0.3%

At this point I have a little reminiscing: I remember in 2010 there was a lot of talk in the media about the “Lost Decade” for the stock market, which was unchanged in 10 years. At this point I was up 570% in those same 10 years, inspite of 2008, so I was wondering what they were talking about.

2011 - (-14.5%)
2012 - 23.0%
2013 - 51.0% [Post 20]

  • From 1991 to 2007 I averaged about 32% per year compounded. This produced a rather amazing overall multiplication of my total portfolio, In fact, if you sit down with your calculator and multiply 1 by 1.32 (since I averaged a 32% gain) 17 times, you’ll be amazed too. (It’s the power of compounding). You’ll note that this was not a large multi-bagger on one stock, but on my entire portfolio, the whole works!

In 2008, in the big meltdown, I dropped 62.5%, which was pretty terrifying.

In 2009 I was up 110.7%. The way percentages work, after dropping 62.5%, gaining even 110.7% doesn’t get you back to where you started.

In 2010 I was up just 0.3%. In 2011, I was down 14.5%. If you wonder what happened, that was when, with the help of MF Global Gains, I got into all those little Chinese stocks that turned out to be fraudulent. (This was partly the fault of MF GG for recommending them, but certainly in large part my own fault for being naïve. Starrob even warned multiple times about these stocks but I ignored his warnings.)

In 2012 I was up 23.0%, but, as of the end of 2012, four years after the 2008 collapse, I was still not all the way back to where I had been at the end of 2007.

This year, 2013, put me up to a new high, a higher multibagger than I even had had at the end of 2007. For 2013, I ended up with my entire portfolio up 51.0%. This was quite a successful year. [Post 4]

## General Approach and Philosophy

  • Go for companies that are growing fast, and hopefully that are not yet discovered and bid up in price. Avoid “story” stocks that are always going to make money next year or in two years or in five years (Westport is an example of what I mean, or early stage biotechs whose drugs are still in preclinical). If it’s next quarter, that’s okay. Absence or near absence of debt is important, except in companies where debt is part of their business model, where it’s sort of excusable (like DDD which does a lot of acquisitions). [Post 5]

  • Stock picking does work (obviously). Especially if you are lucky, as I must have been. [Post 5]

  • I don’t invest in options. [Post 6]

  • 32% a year compounded doesn’t mean you make roughly 32% every year. For example, here’s a string of the gains of my entire portfolio for twelve consecutive years starting in 1993. Numbers are percent gain. In other words 21.4 means every $100 turned into $121.40, and 115.5 means every $100 turned into $215.50. Here they are: 21.4 - 15.4 - 43.4 - 29.4 - 17.4 - 4.9 - 115.5 - 19.4 - 46.9 -19.7 - 124.5 - 16.7. (So don’t be discouraged if you only make ten percent some year. Keep trying for good gains). [Post 5]

  • When you are first starting out you don’t mind concentrating your investments in half a dozen winners. However, when you are retired, and you are investing for a livelihood, and you don’t have any other income to replace potential losses, you don’t let any position get too big. You never let a position grow bigger than 12% to 15%, and even that is way too much, no matter how much you like the company. (My biggest position now is just under 9%). [Post 5]

  • I never start with an oversized position. I start with a medium or average size position and let them grow. Sometimes, I start with a small position and add to it while it’s growing. [Post 4830]

  • You can’t really keep track of more than 20 to 28 or so stocks, and that’s an outer limit. You need to read all the quarterly reports, and the transcripts of all the quarterly conference calls, which gives you a busy earning season. They often say a lot more on the CC than in the earnings release. Reading the transcripts works much better than listening to recordings as it takes a quarter of the time, and you can skip the forward-looking statements messages, etc. Look at investor presentations too. And get a news feed from your broker on each of your stocks. [Post 5]

  • You can beat any mutual fund over the long run. You can’t tell much from a mutual fund’s results because you are always buying last year’s results. For example, if it’s a oil company fund, and last year oil stocks were in, it will show great results, but this year it could do terribly. Also, you are always buying the results they had when the fund was much smaller and nimbler than it is now (because those good results they had when they were tiny made people pour money in). [Post 5]

  • I pay no attention to 2-baggers, 5-baggers, 10-baggers or whatever in individual stocks, nor do I count them. This is relevant because this way it never crosses my mind to think anything like “This stock is slowing down, but it’s a 9-bagger. Maybe I should hold it for another year to try for another 10-bagger.” Going from a 9-bagger to a 10-bagger is only an 11% gain, so counting 10-baggers is meaningless to me. If I’m no longer in love with the stock, I should be able to put the money into something that will be up 30% in a year, and it will never even cross my mind that I missed having a 10-bagger.

What I do pay attention to is how my total portfolio is doing. When I multiplied my results out from 1991 to 2007 it came to a 115-bagger on the whole portfolio. That’s what is really important to me, since my family and I have to live on the gains.

Here’s another way to think about it: If you have an 80-bagger on a stock that grows to an 85-bagger it sounds exciting, but it’s only a 6% gain on your money. If you take the same money and put it into a new stock where you just get a tiny little 2-bagger, you’ve made a 100% gain on the same money. Which is why I don’t pay attention to trying to get multiple baggers. If they happen fine, but it’s not my focus. [Post 7]

  • One problem investors have is getting attached to their previous decisions and not willing to consider that they may have made a mistake. Not accepting that an investment could be a mistake is a dangerous error. I try to always reevaluate my investments and get out if i’ve made a mistake, or if information changes. Which is why I don’t hold stocks generally for 5 or 10 years. [Post 27]

  • I make mistakes but I don’t regret my decisions. I figure I did the best I could at the time. I also don’t anchor on a price. For example when TSLA went from $30 to $75 in no time, I sold half my position. I then saw it continue up to $110. When it got back to $90 I got back in. I didn’t feel I had to wait for it to get back to $75 where I sold it. In fact when it was at $90, EVERYONE on the TSLA Board was saying they’d buy back in at $60 or $55. NOONE thought it would continue up. I figured if everyone figures it will go down, it won’t. And it didn’t. [Post 40]

  • I buy no bonds of any type. [Post 6]

  • I’m usually nearly 100% in stocks, and only rarely and briefly as much as 10% in cash. I have a couple of small accounts in which I can buy on margin, but my amount of margin in rarely as much as 4% or 5% of my total investment. [Post 6]

  • I don’t invest in futures. (I tried them when I was younger and saw a bunch of money disappear overnight. You are competing against experts). [Post 6]

  • I usually don’t buy a company all at once or sell all at once, but taper in and taper out, unless I have a good reason to get out in a hurry. [Post 18]

  • Trading in and out is self destructive. You remember the trades where you made a few dollars and it encourages you, but you forget the losses. Never take a position to make a few percent. You should be investing in stocks that you can see at least tripling, if not going up ten times. [Post 5]

  • I always buy with the idea of holding indefinitely, never with the idea of a short holding period, but in practice I guess my average holding period is six months to two years. I sell when I’ve fallen out of love with the company or I think the story has changed, or I think that the price has gotten way out of line. [Post 18]

  • Never miss getting into a stock because you are waiting to buy it 25 cents cheaper. The decision is whether you want to invest in it or not. Once you decide, take a starter position, at least. Don’t wait around for a slightly better price. When it’s at $50, I can guarantee that you won’t remember or care whether you paid $10.05 or $10.30, but you’ll be kicking yourself if you didn’t get in. (For a concrete example, earlier this year I bought some shares of a little unknown company AMAVF at $15 and change. It hit $170 this week for an 11-bagger in less than a year. Do you think I care whether I paid $15.25 or $15.50? The issue is: Do you want to buy the stock? If the answer is yes, don’t fool around trying to buy it a bit cheaper. You are buying with a long term perspective.) [Post 5]

  • I’ll base my purchase decisions on how well the company is doing, and my evaluation of how it will do in the future, and how well its price matches its prospects, rather than whether the company came in two cents above, or two cents below, what the analysts predicted. [Post 1366]

  • I look for companies that are growing fast, have recurring income, insider ownership, some kind of moat, reasonable PE, etc, and hope to find most of them in stocks I’m investing in. I don’t try to learn all the financials. Then, like with SYNA, CELG, BOFI, UBNT, etc, hopefully I sit back and let them grow (but keep an eye on them). [Post 3115]

  • I especially think of stocks growing at 30%-60% a year, and selling at 20 times earnings, as very secure because they have a big cushion. [Post 6092]

  • I definitely DON’T sell winners that have had a run (not as a policy, anyway). I only sell if I have a specific reason. [Post 3218]

  • Sometimes you can’t take time to sell. A case example: I bought LOCK after it was recommended by MF. Bought between $18 and $22. Then bad vibes started coming out, investigations rumored, etc. I sold out of my entire position 6 weeks ago at about $17.40 average. It’s been dropping steadily since and it’s down 17% today, and is selling at $10 and change.

You can adopt the MF mantra that if you just hold on it will come back in time, and maybe it will. But I employed that money in much more profitable ways than watching a stock go down and then hoping it will start to come back. [Post 1401]

  • I’m in no way a trader. I never, ever, ever, EVER, buy a stock thinking I’ll try to sell it in a week or a few days for a small profit. I always buy for the long term, but sometimes decide I’ve made a mistake, and go on. And don’t worry about whether I made an error in selling. I worry about what I’m going to buy with the money. (I sometimes even buy something I’ve previously sold (YHOO, NUAN. NUAN was an error both times, and I got out both times).

After all, I lived through the internet bubble of 1999-2000. I sold out of AMZN, YHOO, and AOL in about February one day, after YHOO, as I remember, had gone up $30 to $50 per day for three days in a row. I said to my wife, they may keep going up, but this is insane. I’ll let someone else have the rest of the ride. The bubble broke about 3 weeks later. Some times selling can be the most important thing you can do. I didn’t get out of the market, just bought non-internet stocks and was up considerably for the year. Sure I could have held through the decline, and 10 years later AMZN came back, even if YHOO and AOL never did, but WHY? [Post 1433]

  • It’s a lot harder to make great returns as the amount you are managing gets larger. You can’t just get in and out of a stock with one or two trades as the dollar amounts become too big. You can’t invest in companies that are really small or illiquid, because it’s too difficult to accumulate a position that will be meaningful to your portfolio. And if there’s bad news you’ll be stuck and unable to get out in a hurry without moving the market. It’s like turning a battleship instead of turning a motorboat. [Post 5]

  • You can beat ANY index over the long run, in spite of what you may hear. [Post 5]

  • If the market was efficient no stock would never go up or down 30% in a week (it would have been already accounted for), and you’d never be able to make a 10-bagger. Fortunately for us, the market is OFTEN very wrong about a stock (either too high or too low at times). [Post 6131]

  • I always buy with the idea of holding for years but I often have to sell out sooner as conditions change. [Post 5]

  • Peter Lynch suggested a monthly graph of stock price vs trailing earnings on a log scale map, which I have found very helpful. I scale it so that if the stock is twenty times trailing earnings the price and the earnings graphs will overlap. That gives you a quick visual perspective of whether the stock is cheap, reasonably priced, or wildly priced, and also give a nice visual of how fast earnings are growing that you can compare with your other stocks, as you use the same scale for all of them. [Post 5]

  • When things go bad with growth stocks they can lose 70% of their value, but if things go well they can go up 300% or more. If you have only one stock, that is very dangerous. If you have 25 stocks and three or four crash and eight or nine take off and fly, you don’t worry so much about the three or four. [Post 435]

  • I have some thoughts on the Estimates Game. I exaggerate a little for the clarity of the message, but what I am saying is essentially all true. I hope you find these ideas useful:

The whole earnings and revenues estimate game that the analysts play has put the company CFO’s, who give the outlooks, in a no-win situation. Here’s how it has come to work over time:

It doesn’t seem to make any difference how good or bad the actual results are, whether they are up 3%, or 30%, or 70%, or more. The only thing that the headlines pick up is whether the earnings beat the analysts’ estimates or missed the estimates. (Who cares???)

For example, a company whose earnings are up just 3%, but beats estimates by a nickel, will get screaming headlines. The headlines won’t say “ABC earnings only up 3%!” Oh no! The screaming headlines will say “ABC beats estimates by five cents!” The price will undoubtedly rise.

On the other hand, a company whose earnings are up 70%, but misses estimates by two cents, will get equally screaming headlines, not saying “DEF earnings up an amazing 70%”, but saying “DEF misses estimates!!!” The price will undoubtedly fall.

The whole estimates game is only about whether the earnings and revenue beat or miss a number that some analysts have picked. It totally ignores the question of how well the company is actually doing, and how good (or bad) the revenues and earnings really are.

However, the companies aren’t stupid. They have figured this out. And they have started to give lower and lower estimates for their next quarter, picking numbers that they are almost certain to beat (by a lot). They don’t want the bad publicity of missing analyst estimates. (Again, who cares!!!)

So what happens? The companies give low estimates and the analysts say “Good earnings, but disappointing estimates for the next quarter. We’re downgrading them from a buy to a hold.”

Thus the companies are screwed whatever they do. If they estimate high, where they think they will be, and miss, they get the “missed estimates” headlines, and if they estimate low, to let themselves beat estimates handily, they get the “disappointing estimates” headline. They lose either way.

How do we as investors deal with this puzzle. Think “How is the company doing? How much are earnings and revenues actually up?” Ignore the “missed by 2 cents” headlines if earnings are up by 40% or whatever. What the analysts had estimated doesn’t matter a hoot in the long picture, and if a stock sells down in spite of great results because of “missed by 2 cents” headlines, treat it as an opportunity.

Just my opinion. [Post 1315]

  • If a company makes 70 cents, up 75% from 40 cents, I don’t care a hoot if the analysts expected 72 cents or 68 cents, and if the company thus missed or beat predictions by 2 cents!!! What matters to me is that the company is growing earnings at 75%, and if the company sells off because of an “earnings miss” (which is a ridiculous term for a company increasing earnings by 75%), I might take advantage of it by adding to my position. [Post 1368]

  • Evaluating company results against consensus analyst estimates can produce perverse and peculiar results. Consider this hypothetical: A small stock with three analysts following it, has an average estimate of 50 cents for the next quarter. Another “analyst” representing a firm which is secretly short the stock, puts in an estimate of 82 cents. This raises the “average estimate” to 58 cents. (50+50+50+82=232. 232/4 = 58 cents). By raising the estimate he sets the company up to “miss” estimates. After all, it doesn’t matter what the actual results are, just whether they met expectations. Right???

Sure enough, if the company makes 53 cents, what would have been a nice beat becomes a 5 cent miss. The stock sells off for a few days, until people figure out that 53 cents was a very good result, and meanwhile, the firm closes out its short at a profit.

Pretty ridiculous, isn’t it. But this hypothetical scenario could, and probably does, play out in the current market. [Post 4025]

  • No one knows how long a stock price can keep climbing. If you sell now at $135 it could keep going up to $200 before it takes a rest. When it was up $15 from where you sold, would you buy back in or just watch it go? And if you timed it right and sold now, and it dropped $15 would you get back in, or would you wait for down $20? And then if it got to down $19 and started back up, would you panic at down $12 and buy back in? And then, what if it goes down $5 from there? Do you buy, sell or hold? In other words, trying to time the market in these stocks will drive you crazy. If you don’t have a good reason to sell (Things aren’t right with the company, it’s too big a proportion of your portfolio, sales and earnings are continually disappointing, etc), just stay with it and enjoy the ride [Post 2151]

  • You’d be much better off staying nearly 100% in the market and just deciding WHICH stocks you want to invest in, instead of complicating it with deciding WHEN you want to buy, and trying to time the market. For example, you don’t want to buy now because the market looks good, but I suspect you didn’t want to buy seven weeks ago at the bottom either, because then everyone was saying the market is going lower. And if these stocks go up 10% from here you certainly won’t want to buy, but if they go down 10% from here, you’ll wait for 20%, and then if they start back up you’ll wait for them to get back to down 10% again, which may never happen.

Just think, if you stay fully invested you can forget about all those crazy-making decisions, and just concentrate on which stocks you want to own for the long term. [Post 2350]

  • I have very clear guidelines for what a consider a real investment prospect. Rapid growth in sales and being profitable are indeed a part of those guidelines. When I find a company like that and decide to take a position, I usually quickly build it to an average position, which is currently about 4.5%. However, when I come across a little company which is growing VERY rapidly, and isn’t yet profitable, I sometimes take a tiny position, just to keep it on my radar, and also because I can’t resist.

My idea is to put them away for years. Since I have tiny positions, selling for a 20% gain would be a lot of work for insignificant gain. I’m hoping, if I collect a few of these tiny positions, that if one of them goes up 10 or 20 times, I won’t mind if the others crash. If any of them become profitable and turn into a real company, I would then treat them like a normal investment and I might add to my position. If they go down in price I WOULD NOT add. I’d assume that there’s a good chance that they are down for good reason, and I won’t toss away more money. If they all go to zero, it won’t affect my overall results in any meaningful way, as these are really small positions. Basically, I’m just playing around with them. Remember that you don’t have to do the same. I’m willing to accept that these may be silly stocks to take even a small position in. [Post 2387]

  • If you have the time, do a weekly graph on your stock, on old fashioned large graph paper. It helps you keep things in perspective. A drop from $51 to $49 doesn’t look so bad if you look back and see that it’s been between $52 and $48 for the past six weeks, or if you see that your stock rose from $40 to $51 in the previous two weeks and the “drop” to $49 is meaningless. (The problem with graphs that your computer makes is that a move from $10.00 to $10.05 will fill the whole space if that’s the whole move for the day or week. There’s no fixed scale.) Mark where you made purchases. [Post 5]

  • Just out of curiosity I figured the average PE ratio of my eight biggest positions. These are rapidly growing companies but the average PE was 20.1. Note that that goes against the Rule Breaker idea of picking overpriced stocks, or even ones with no earnings. Companies like Zillow, with a PE over 200 or something, may do just fine over the long haul, but I’ve decided “Not for me.” If I can find a rapidly growing stock with a reasonable PE, why buy expensive stocks where you hope they’ll grow into their price? [Post 3943]

  • By the way, those top eight positions made up 78% of my portfolio, with 22% scattered among the smallest six. So my portfolio is clearly weighted toward reasonable PE’s, even if I have made exceptions for small positions. [Post 3946]

  • Thoughts about being Number 1:

John seemed concerned that I’d feel bad because his totals were higher than mine. But that’s not what this is all about. It’s not a game where there is just one winner. We can all be winners. The goal is not to have the best record. Not even…not even, to beat a benchmark like the S&P. The goal is to be successful, to make enough money at investing to support your family eventually and be able to purchase the goods and services that you need in life. I have never dreamed that I’d be the best investor in the world, or the most successful. Worrying about that will make you crazy. I just want to be a good, successful, investor.

This is something I learned when I went away to college. In high school I was 3rd in my class of 800 students and I really felt at the top of the totem pole. But then in college I discovered that there were always students who were much smarter than I was, no matter how smart I was. For example, I remember my chemistry class that was marked on a curve. This means there was a bell shaped curve with a long tail, and beyond a certain point on the tail you got an A. They posted everyone’s score and the cut off points. I might get an A on an exam, but there were other students who were so much further along on the curve than I was that they had to understand what we were being taught on an entirely different level than me. They were super-A’s. It was the same in all my courses. There were always students who were better than me at every subject. And I graduated with an A- average. I learned that I didn’t have to be “best”. I didn’t have to get the highest A. I just had to get an A.

You can think of possessions the same way. There will always be someone with more money, a bigger and better house, a nicer wedding ring, a more exciting vacation, whatever. Don’t sweat it. It doesn’t matter. Happiness isn’t getting what you think you want. Happiness is being content with what you have - on the way to possibly getting what you think you want. It’s today you want to be happy, not in the future. The future never gets here. It’s always today. And it’s guaranteed, if you get the biggest and best house around, the next week you’ll discover someone with a bigger and better house. [Post 4037]

## Evaluating an Individual Company

  • I look for companies that are easy to follow, (which is why a lot of my companies are recommended by the MF). It means that I generally avoid foreign companies. (Arcam, the Swedish 3D printing company, is an exception.) [Post 6]

  • I want a company with rapidly growing earnings. I usually won’t touch a “story” company that is losing money, but that "will break even two years from now”, no matter HOW enticing the story is. [Post 6]

  • I won’t touch ANY Chinese company. Not even Baidu. This is due my experience in 2010 or so with 13 little companies (some recommended by MF global Gains), of which fully 11 turned out to be fraudulent in one way or another. You simply can’t tell what’s going on in a Chinese company. Consider that Yahoo is a major company and owned 40% of Alibaba, and the Chinese CEO blithely gave himself the fastest growing subsidiary as a present without telling Yahoo. If it can happen to a big company like Yahoo, what chance do I have? I probably wouldn’t invest in companies in other emerging markets either. [Post 6]

  • I suggest not getting PE off Yahoo, or Seeking Alpha, or eTrade, etc, but getting trailing earnings off the last four earnings reports, which you can always find on the company’s Investor Relations site. Then divide the trailing earnings into the stock price. [Post 1234]

  • I look for a company that has a long way to grow. A company that I can hope will be at least a 3 bagger and maybe a 10 bagger. (That’s one reason I sold out of my position in Apple. Most people who are long Apple are hoping for a rise from $450 to $550 or $600. That’s equivalent to buying a stock at $4.50 because you hope it might get to $5.50 or $6.00. I wouldn’t buy a stock at $4.50 unless I though it could get to $20.) [Post 6]

  • That means a company that has a long runway, that ideally can grow almost forever. (Like Solar City, for example, or WisdomTree. What I mean is a company where the addressable market is so big that their share of it allows them to keep growing for the foreseeable future. That’s no guarantee that they will, but it’s better than a company that already has 40% of it’s total available market, for instance, and can only double once.) [Post 6]

  • How do you know when a company is too big? Let me try some answers off the top of my head.

First, Look at SKX. Their market cap is less than 1/20th of Nike’s so you can easily imagine it doubling and doubling again, and if Nike just rises 5% to 10% per year with the market, SKX will still be under 15% of their market cap. On the other hand, can you imagine NKE doubling and doubling again? It’s impossible. They already have most of the market.

Now to generalize that: If a company owns just 5% of a market, it has a lot of room to double and keep on doubling, especially if the market is growing too. If the company already has 80% of the market, all that it can grab is the other 20% of the market (which is unlikely, anyway). If a company has most of the market because it just invented the market and has first mover advantage, and the market is hardly penetrated, it has plenty of room to grow (think Apple 10 years ago and the first iPod/iPhone). If it’s an old market and is saturated, that’s a different story. (I haven’t followed Starbucks, which you asked about, and don’t know how saturated their market is, but my guess is that they would have been a better buy a number of years ago than they are now, and that the coffee shop market doesn’t have too many doubles left.)

Finally, there is the problem of big numbers. If you have a chain of 200 stores and you can add 50 a year, the first year you add 25%, but the same 50 stores only adds 20% the second year and 16.6% the third year, etc. To maintain the same growth rate, you have to add a larger number of stores each year, and you run out of places to put them.

If you have another kind of firm, with $100 million in sales, and double it, the next year you will need to add $200 million to maintain the same rate of growth, and $400 million the next year, and it soon becomes impossible, except in rare cases.

Apple is already the largest company in the world. Even they come out with an exciting new product, it has to be truly enormous to budge the dial significantly on sales. That’s not saying it’s sales won’t grow, but how many doubles can you imagine? Can you imagine even one? Over how many years? (all my computers and phones are Apple, I have nothing against the company by the way). [Post 6951]

  • I want a company that does something special, a “Rule Breaker”, not a company that just makes a commodity product well. [Post 6]

  • I avoid mining and drilling and natural resources stocks, which tend to go in cycles from boom to bust. [Post 6]

  • I’ve always had trouble buying restaurant chains. They seem inherently limited. How many outlets can you build without getting to a point of diminishing returns. I know the Fool has done well with some of them but it’s just not my thing. [Post 5305]

  • I want management to be interested in making a profit. (That’s why I sold out of amazon even though I love the company. I saw an interview where Bezos touched on a dozen or so goals he had for the company over the next ten years. Making a profit just wasn’t on his radar screen, never even mentioned. (I realize that this has made me miss out on the increase in amazon’s price, but I just wouldn’t be comfortable with it). [Post 6]

  • Never miss getting into a stock because you are waiting to buy it 25 cents cheaper. The decision is whether you want to invest in it or not. Once you decide, take a starter position, at least. Don’t wait around for a slightly better price. When it’s at $50, I can guarantee that you won’t remember or care whether you paid $10.05 or $10.30, but you’ll be kicking yourself if you didn’t get in. (For a concrete example, earlier this year I bought some shares of a little unknown company AMAVF at $15 and change. It hit $170 this week for an 11-bagger in less than a year. Do you think I care whether I paid $15.25 or $15.50? The issue is: Do you want to buy the stock? If the answer is yes, don’t fool around trying to buy it a bit cheaper. You are buying with a long term perspective.) [Post 5]

  • Treat the companies as if you had just encountered them, and then decide, based on their current earnings growth, PE ratio, prospects, price, etc, would you buy them now. what they did in the past is irrelevant. Price anchoring is a BIG mistake. [Post 4830]

  • I look for companies that are growing fast, have recurring income, insider ownership, some kind of moat, reasonable PE, etc, and hope to find most of them in stocks I’m investing in. I don’t try to learn all the financials. Then, like with SYNA, CELG, BOFI, UBNT, etc, hopefully I sit back and let them grow (but keep an eye on them). [Post 3115]

  • Here are some ideas for evaluating a new company.

  1. Go to the company website and find out what they do. To get there, google, for example, “Zillow Investor Relations” and you’ll get the Zillow investor relations website.

  2. Read the text part, at least, of their last quarterly report. “Analyzing the financials” sounds intimidating, and probably isn’t necessary. They usually tell you in words what is going on.

  3. Read the transcript of the conference call. You should be able to find it on Seeking Alpha “Zillow Q1 2014 Transcript” should get it. (Yep, I put it in on Seeking Alpha and it came right up).

  4. Go back through at least two years of quarterly reports and pull off at least adjusted earnings and revenue. Make a table (pencil and paper) for each. Since you are interested in Avigilon, here’s what their revenues look like

2012 - 18 24 25 33 = 100
2013 - 32 39 51 56 = 178
2014 - 56

You see what a good visual image this gives you. You can see both sequential change and year-over-year change at a glance. And that 78% increase in revenue from 2012 to 2013.

Here’s earnings

2012 - 02 04 08 08 = 22
2013 - 08 10 22 19 = 59
2014 - 19

Incredible rate of growth.

Then do a running 12 month trailing earnings:

12 2012 22
03 2013 28
06 2013 34
09 2013 48
12 2013 59
03 2014 70

Gives you a picture of where they are going and how fast. You should graph this on a piece of log paper. (On log paper a move from 10 cents to 20 cents is the same length as a move from 50 cents to a dollar (100%).

To compare, here’s the earnings for BOFI. Regular good growth, but of course not as fast.

2012 - 58 64 67 70 = 259
2013 - 74 78 85 91 = 326
2014 - 100

12 2012 259
03 2013 275
06 2013 289
09 2013 305
12 2013 326
03 2014 352

Now Avigilon will sell at a higher PE than BOFI so it balances out. There’s a limit how high you should pay for rapid growth though. [Post 2003]

  • By the way, other patterns jump out to the eye as well. For example, if you look at Aviglion’s earnings,

2012 - 02 04 08 08 = 22
2013 - 08 10 22 19 = 59
2014 - 19

you notice that earnings don’t rise between the fourth quarter and the first quarter of the next year, it’s called “seasonality”, and then rise in the second and subsequent quarters. When that happens in the future it won’t bother you because you’ll say “Oh yeah, their first quarter is always a little light”.

Same with revenue, by the way:

2012 - 18 24 25 33 = 100
2013 - 32 39 51 56 = 178
2014 - 56

A quick glance will show you that BOFI does not have the same seasonality, but rises a little each quarter.

2012 - 58 64 67 70 = 259
2013 - 74 78 85 91 = 326
2014 - 100 [Post 2011]

  • This is another a nice way to evaluate companies for investment. Using this method, the first step is to look at Cash Flow. You want to make sure the company is self-sustaining, producing positive Free Cash Flow, and not eating away at its Cash Balance. You’d also like to see Free Cash Flow as a percent of Revenue (Free Cash Flow Margin.) grow from year to year

The second step is to see if Revenue is growing year over year, and whether operating expenses grow at a slower rate so that Operating Margins. can increase as revenue expands.

Third is to make sure that the share count is not increasing unreasonably fast.

Our fourth step is to take the market cap (stock price by total number of shares) and divide it by Free Cash Flow to get the Free Cash Flow multiple… It’s actually a P/FCF ratio instead of a P/E ratio, and rational ratios should also be somewhere in the 20’s or so, depending on rate of growth…

Fifth is to check levels of cash and debt.

Sixth the consensus earnings estimates and rate of growth. This could be deceptive as companies often low-ball their estimates, and analysts go along.

Seventh, look at the 10K to evaluate the business, its competitors and its risks.

Finally read the last couple of conference call transcripts to see how management feels about the business now and in the future. [Post 2165]

  • I look for recurring revenue. I LOVE recurring income and the razor and razorblade model. [Post 6]

  • I look for insider ownership. [Post 6]

  • I look for a company that is rapidly growing its revenue. By rapidly I’m looking for usually AT LEAST 25% per year. (That usually rules out companies with no revenue like start up biotechs or start up diesel-from-algae companies, as well as slow-growing companies. I do occasionally make an exception as I have done for a small position in SZYM, which has two large factories coming into production by the fourth quarter and another the first quarter of next year, with big time partners). [Post 6]

  • I pay no attention to GAAP earnings and only look at non-GAAP or adjusted earnings. I know this bothers some people, but it’s what I do. I feel that GAAP earnings ridiculously distort the picture. (Consider company X that has a big tax benefit this quarter and reports huge GAAP earnings, and then next year they pay normal taxes and looking at GAAP, it appears as if their earnings have tanked, just for a trivial example. Or company Y that has outstanding warrants. If their stock price goes up, GAAP rules makes their apparent GAAP earnings go down due to repricing of warrants. Just nonsense. I especially remove stock-based compensation as an expense). [Post 6]

  • If I have confidence in management, I just use the adjusted earnings they give. If I start messing around and adding and subtracting things I won’t remember next time what I did and why, and also the earnings won’t be comparable with past and future earnings. On the rare occasions that I do eliminate something (sometimes companies show big swings up and down in foreign exchange gains and losses, for instance), I make a big note in red in my notes about the quarterly results so I’ll remember to eliminate the same thing next time. This perhaps sounds overly trusting, but what I’m aiming for is seeing how the company has been functioning over time, and accepting management’s adjusted earnings usually works for me. After all, they are trying to evaluate the same thing. [Post 5794]

  • I think a stock growing earnings consistently at 9-10% per year, and selling at 60 times earnings, is inherently risky. It’s maybe six times higher than it should be, which gives a lot of room to fall.

When I look at my stocks, starting from the biggest, there’s:

UBNT, trailing earnings up 100% from a year ago with a PE of 19.
BOFI growing trailing earnings at 28% and at a PE of 23.
CELG, growing trailing earnings at 20%, PE at 22 to 23.
SYNA, trailing earnings up 88%, PE of 14
AMBA, trailing earnings up 32.5%, PE of 20

You get the picture. That’s where almost 50% of my portfolio is. [Post 1416]

  • (New!) There is a difference between a company doing well and a stock doing as well, if the stock price already has an enormous amount of growth factored in. [Post 7143]

  • To get an idea how my method of evaluating stocks works, here’s a post I made on the XONE board on June 27 last year, when MF was touting XONE as the next greatest thing. The price was $59.

“Frank, I’m just commenting about why a stock with negative earnings, that has never had a profitable year, would be selling at such a huge inflated price. Granted, some is about prospects for the future, and some is the 3D hype, but some must be hopes of the company being acquired. (The price took off after SSYS just acquired MBot (or whatever the name was)).”

“Look, last year they lost $10.2 million on $28.7 million of revenue. That’s a negative margin of 35.5%. It means they lost 35 cents on every dollar of sales!!!”

“In the first quarter of this year.they lost 20 cents the first quarter in spite of great revenue. Say that by magic they overcome the loss in the next three quarters and finish the year with 25 cents profit. I’m not rejecting the possibility. With that miraculous result, they’d then be selling at over 200 times earnings. (220 times to be exact).”

“What can I say? I think the technology and the company have great futures, but the stock may be miles ahead of itself. Miles and miles and miles. I may be totally wrong, and greatly underestimating, but it’s worth considering those figures.”

That post got all of 2 rec’s. XONE’s price at yesterday’s close was $25.70, well less than half its price of $59 when I was writing. Lest you think that XONE is just down because of the current sell-off, let me compare it with UBNT, one of my stocks which has been absolutely pounded in this sell-off. On the same date, June 27, 2013, UBNT was at $17.43. It closed yesterday at $32.40, up 86%. Or Ambarella! It’s hard to find a stock that’s been killed more than AMBA has been in the last couple of months. It was at $16.18 on June 27, 2013, and closed yesterday at $24.20, up 49.5%.

Intelligent stock picking does pay off.

And, by the way, in the quarter just reported, XONE had a loss of 38 cents, increased from the loss of 20 cents a year ago. And it’s still a misleading “Buy” in MF RB. Eventually, even some time soon, for all I know, it may turn around and start making money (or be acquired), but there was a lot of opportunity loss for anyone who has held it all this time. And it’s minus 54% compared to its benchmark according to MF. Tell me again how it’s always a mistake to sell out of a position. [Post 1451]

  • Given a choice between a low PE company and a high PE company, growing at comparable rates, I’d go for the low PE company every time. Which is why my big four positions are SYNA, UBNT, CELG and BOFI. All reasonable PE’s. I have to admit that my next one, Z, is a folly, but this kind of stock is a distinct minority in my portfolio. [Post 2537]

  • Buying stock in companies that are losing so much money that they’d have to quintuple their revenue to break even is not a smart move. [Post 3619]

  • Analysts opinions don’t mean anything. They have to follow 100’s of stocks, so they can’t know much about any of them. If their company is doing financing for the company, with the big commissions that that involves, or hope to run financing for the company, they can’t predict negatively. Often they forget to bring a recommendation up to date for 6 months or a year or more., etc.

You can do better than analysts. Most of them don’t do so well at all. Pay attention to severe warning signs. Don’t buy story stocks that are losing lots of money, but hope to break even the year after next (which often gets pushed off indefinitely). [Post 3924]

  • I almost never see a regular analyst make a call before a down move on any stock. At $40 it’s a “strong buy”. At $35 it’s a “strong buy”. At $30 it’s a “strong buy”. At $25 it’s a “strong buy”.

Then, after being wrong all the way down, when it gets to $20, and when maybe it has actually become a buy, they drop their call and say it’s a “Hold”. What kind of help for the investor is that? [Post 3930]

  • Just out of curiosity I figured the average PE ratio of my eight biggest positions. These are rapidly growing companies but the average PE was 20.1. Note that that goes against the Rule Breaker idea of picking overpriced stocks, or even ones with no earnings. Companies like Zillow, with a PE over 200 or something, may do just fine over the long haul, but I’ve decided “Not for me.” If I can find a rapidly growing stock with a reasonable PE, why buy expensive stocks where you hope they’ll grow into their price? [Post 3943]

  • By the way, those top eight positions made up 78% of my portfolio, with 22% scattered among the smallest six. So my portfolio is clearly weighted toward reasonable PE’s, even if I have made exceptions for small positions. [Post 3946]

  • A PE of 15 would be okay, I guess, if you were talking about conservative, slow-growing, DOW-type stocks. Mine are much faster growing. I accept a PE of 30 on CELG and some other stocks lower down on my list, but if I can get the rapid growth cheap at a PE of 20, that’s great. [Post 4568]

  • (New!) There are good reasons while some stocks are priced unreasonably high and others are not.

Public Facing
Everyone has heard of Amazon, and most people have bought something from them. It gives the illusion that they are very profitable (they’re not). No one who’s not in the railroad business has heard of WAB. The fact that WAB grows much faster than AMZN doesn’t matter. AMZN gets the big PE.

Railroads are boring. The MF SA board for WAB has had a total of 132 posts since it was recommended back in 2012. Just 20 in the last year. The MF HG board has had 26 posts TOTAL since 2012. 26 posts! The fact that the stock isn’t boring and has gone straight up didn’t make a difference. XPO and WPRT had exciting stories. The fact that neither of them had ever made a dime of profits didn’t matter.

UA has glamor. You see it on TV at all the sporting events. SKX has earnings growth. Who gets the high PE? I’ll leave it to you to guess.

UA’s trailing earnings the last three years have been
61 cents
75 cents
95 cents

Does that warrant a PE near 100 times earnings???

SKX’s trailing earnings the last three years have been
19 cents

Does that warrant a PE of under 25??? But Skechers shoes are boring (my wife has never bought another brand shoe since her first Skechers).

And with UA making 95 cents a share, and SKX making $2.99 a share (more than three times as much), which has the higher share price? UA! Based on these facts, would you pay more for UA per share, just for the glamor? People do! $12 more! It’s insane! [Post 7427]

  • (New!) A new statistic – The 1YPEG

Normally a PEG ratio is the PE ratio divided by the estimated average earnings growth rate for the next five years (lower is better, of course) . But that’s a total guess! No one knows what a company’s average earnings growth rate will be for five years.

I think a more useful ratio would be a One Year PEG looking backward. In other words, the one year trailing PE divided by the one year trailing earnings growth rate. It has the disadvantage or flaw that you are looking backward, but at least you are using a real number, NOT A GUESS. Who would have dreamed at the end of 2012 that ELLI would have an essentially zero earnings growth rate over the next two years? Or that SKX would have 1500% earnings growth in the next two years? I guarantee you, no one! A five year estimate is nonsense.

Here are some examples. (A growth rate the same as the PE gives a PEG of 1.0. A faster growth rate gives a lower PEG. A slower growth rate gives a higher PEG).

AMBA has a current PE of 37.8 divided by earnings growth last year of 80%, so its 1YPEG is 37.8/80 = .47
BOFI has a PE of 21.2 divided by an earnings growth of 39% so its 1YPEG is .54
EPAM has a PE of 30.5 divided by an earnings growth of 34% so its 1YPEG is .90
SWKS has a PE of 25.1 divided by an earnings growth of 64% so its 1YPEG is .39
FB has a PE of 47.8 divided by an earnings growth of 94% so its 1YPEG is .51
MIDD has a PE of 30.9 divided by an earnings growth of 24.5% so its 1YPEG is 1.26
SKX has a PE of 24.4 and earnings growth of 158% so a 1YPEG of .15
UA has a PE of 88.6 and earnings growth of 27% so a 1YPEG of 3.28 (huge).

This is important because you can see that for every dollar invested SKX gave 21 times as much growth of earnings as UA (3.28/0.15). (Or you can think of it as 6 times the earnings growth times 3.6 times smaller PE (dollars paid per earnings dollar) gives 21 times more growth per dollar invested). [Post 7435]

  • (New!) Please remember that the 1YPEG isn’t a magic formula that replaces everything else. It’s just a good indicator. But it doesn’t replace looking at the company and evaluating what it does, reading the conference call transcript, making sure the company isn’t weighted down with debt, and all the other factors I’ve talked about. It also can be distorted by one bad quarter two or three quarters back, etc. I’m concerned that everyone will get carried away with unrealistic expectations for this indicator. [Post 7768]

## GAAP vs. Non-GAAP

  • It’s important that you realize just how insane that GAAP rule is. Let’s consider what would happen if some terrible news came out about PSIX during the quarter. For example, if a big new engine had a bunch of defects, or a new competing product showed up which was taking lots of their customers, their revenue was dropping like a rock, and their price really crashed (for GOOD REASON!).

GAAP rules for repricing the warrants would mean that the company would show huge (imaginary) increases in GAAP earnings for the quarter!!! And this is from a system that is supposed to be giving the public a clearer idea about what is really happening at the company!

(For those who wonder what their rational is, it’s: stock price down = obligation from warrants reduced = more GAAP profit) [Post 197]

  • Some people, even some people on these boards, feel that GAAP is important because companies may try to fudge non-GAAP results. I know, for instance, that Fletch, who is trained as an accountant, follows GAAP (although even he admits that the GAAP rules on repricing warrants every quarter according to the stock price give bizarre values). I think you’d have to say that some accountants like GAAP, while lots of CFO’s don’t. I use adjusted results because they tell you what the real company is doing. And realize that GAAP can sometimes give inflated revenues or earnings, not just lower ones. For example, today’s Pandora results gave them about $15 million extra in GAAP revenue that they didn’t really make this quarter because of the GAAP release of some held back revenue. [Post 985]

  • I pay no attention to GAAP earnings and only look at non-GAAP or adjusted earnings. I know this bothers some people, but it’s what I do. I feel that GAAP earnings ridiculously distort the picture. (Consider company X that has a big tax benefit this quarter and reports huge GAAP earnings, and then next year they pay normal taxes and looking at GAAP, it appears as if their earnings have tanked, just for a trivial example. Or company Y that has outstanding warrants. If their stock price goes up, GAAP rules makes their apparent GAAP earnings go down due to repricing of warrants. Just nonsense. I especially remove stock-based compensation as an expense). [Post 6]

  • I don’t like excessive stock compensation either, but you have to remember that at most small technology companies, that is most of their compensation as the companies don’t have much money. It also allies their interests with ours if they have options which are only valuable if the price goes up.

I ignore GAAP earnings because the stock-based compensation is already accounted for in diluted shares. More shares reduces earnings per share. Taking it as an expense also double counts it, which is why almost every company that I know of subtracts out the stock based compensation non-cash expense when they figure adjusted earnings or “real earnings”.

By the way, analyst earning estimates are almost always adjusted earnings too, as far as I know. Also if you read the companies’ disclaimers they almost always specify that they use adjusted earnings for their own internal evaluations of how the company is doing. They often give GAAP results as a formality, and then base their entire discussion of results on adjusted results. [Post 970]

  • For those who think that GAAP are the only valid earnings, and that Non-GAAP are just 'cheating", here are the latest PSIX results.

GAAP earnings 68 cents
Adjusted earnings 39 cents

Whoa! Adjusted just about HALF of GAAP? How can that be? Because, as usual, GAAP has a lot of nonsense in it:

  1. GAAP is up because the stock price was down so they had to reevaluate the “liability” of the warrants downward due to the lower stock price. This gave more “earnings”. (Note that if the stock price had been up, repricing of the warrants for more liability would give lower earnings. If you think that makes sense, well…)

  2. In addition, GAAP income includes a non-cash gain resulting from a decrease in the estimated fair value of the “contingent consideration liability” recorded in connection with an acquisition. This also gave more GAAP earnings.

Now if you think GAAP gives a better idea of how the actual business did in the quarter, be my guest. As I said, it’s nonsense to me. [Post 4680]

  • [Note: this entry was written by ptheland and is included at Saul’s request]

At its core, accounting is an attempt to present the financial performance and position of a business so that management and investors can make intelligent and informed decisions about the business. Income is reported when earned, expenses reported when incurred, assets and liabilities of the business fully disclosed.

The problem is that management always has more information about the business than investors. And management is the one that prepares financial information for the investors to use. So it becomes easy for management to mislead investors about the finances of a business.

Many of our current accounting pronouncements are nothing more than a reaction to a problem (usually a fraud by management) that has arisen at some company. If you follow all of the big frauds over the years, you’ll usually find some new accounting rule following the fraud that is an attempt to keep that fraud from happening again.

I call that “legislating morality”. And you simply can’t write laws and rules that cause people to behave morally. Morality and fairness don’t arise from laws, they arise from within the individual. Laws and rules simply allow society to define behaviors that will be punished in some way.

So applying this to financial statements, we get back to the issue of management vs. investors. Investors are entirely reliant on management for their financial information. GAAP and IFRS cannot create fair financial reporting, they can only identify unfair reporting when that particular unfairness has happened before. Dishonest management will create dishonest reports. Honest management will create honest reports.

What does this say about GAAP vs. Adjusted Earnings? It says we need to look at management first. Financial reports that follow GAAP don’t necessarily give a good picture of a business, they simply follow the rules laid down by GAAP. Adjusted earnings (or adjusted anything) can be a good thing when honest management is attempting to give investors a more complete picture of the business than can be conveyed in GAAP financial statements. But adjusted earnings can be used by dishonest management to cover up problems.

So I’d say the first step in evaluating a business is not to look at their finances, but to look at their management. Honest management will give honest financial statements. Dishonest management will give investors dishonest financial statements - even if those statements follow GAAP. When you find dishonest management, move along. You will never be able to fully trust information coming from that company.

GAAP vs. Adjusted earnings? Bring on the adjusted earnings. But before I put any faith in either, it is up to me as an investor to do my due diligence work on management. [Post 5606]

## Prospecting for Companies

  • As you probably noted from my list of stocks in post #3, some 15 of my 25 stocks were MF SA and MF RB picks (mostly RB, actually), although I have to admit that I had invested in 4 of them before they were picked by MF RB. I really prefer to invest in MF picks because the discussion boards and continuing coverage is incredibly important to me, so those are truly my favorite places to prospect.

I got Arcam (which is currently a 9-bagger for me in a year) from a Seeking Alpha article on 3-D printing stocks. Random article.

I got Solazyme, I think, from a newsletter called Game Changers published by Street Authority (which I no longer take by the way), added to by articles on Seeking Alpha.

I got Yahoo, before its RB recommendation, and TMUS, from a newsletter called Stock of the Month, also published by Street Authority. Note that these newsletters from Street Authority have no discussion boards and no real ongoing support, such as you find on MF.

I got INVN and AMBA before their MF selections, as well as UBNT, AFOP and SYNA, all from Zack’s Home Run Investor. Be aware that the guy writing the newsletter doesn’t seem to know much about what the companies actually do, just that the analysts are raising estimates on them (which is Zack’s thing). He’s used to doing short term trading, and it shows. Most of the companies don’t interest me at all, and you really need to research them yourself, but I did find the above stocks some months ago (nothing of interest lately).

I got PSIX from the free Vista Partners Newsletter. I believe it’s a actually paid recommendations by the companies. I’m not sure how I got on their mailing list. They seem to be somewhat selective but most of their companies are start-ups that I wouldn’t touch. I just got lucky with PSIX.

I got the idea for my little positions in DPZ and NGVC from articles on a free MF board called Pencil’s Palace. [Post 120]

  • I’ve also gotten ideas from articles in the NY Times or the BBC (on my computer) random posts on MF, especially on RB New Stock Ideas, but actually on all the boards where people mention some company they are interested in. The places I mentioned are the most common ones, especially, as you see, the MF recommendations. [Post 122]

## Investing Ethically

  • My last two posts dealt with ZLTQ and HZNP, both of which made me feel uncomfortable because of a cer