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Small-Cap Internet Stocks Editor’s Note: Here at Sleuth Central, we have long been wary of the Googles of the world. Today, our foreign market guru, Christopher Hancock, tells why… Flying High on the Wings of Google
The author of this quote is Benjamin Graham, mentor to Warren Buffett. Graham understood investing. He stressed knowing a company’s intrinsic value. He focused on the business, not the stock. Graham often shunned the term “investor.” Most so-called investors were truly nothing more than speculators. They were individuals looking for a “shortcut” to superior returns. He understood that most investors lacked patience. They lacked discipline. They lacked the basic tools needed to succeed. In essence, Graham understood human nature. He called attention to the airline industry. The 1940s and ‘50s gave birth to commercial air transportation. Everyone knew the potential. It didn’t take fancy analysts in pinstripe suits to forecast enormous passenger growth rates. Before long, airline stocks were “it.” Cocktail parties offered the sound analysis. Soon, every portfolio needed Pan Am. But even simple puzzles have many pieces. Profits require much more than double-digit growth rates. Fuel costs and fierce competition crippled industry margins. Labor disputes added fuel to the fire. ************Special Offer************ Meet the Only Trader-At-Large Who Can Take You from $1,074 to $28,271 in Under Four Months If turning $1,000 into $28,271 in under four months sounds unreal to you then permit me to welcome you to the ranks of commodity traders. They make triple-digit gains on every commodity from corn to crude to cattle. Right now, they're taking their moves from the Trader-at-Large who earned his stripes as one of the youngest members in the pits of the New York Cotton Exchange. There is a free report that will let you join their ranks. But you only have until Monday at midnight. Check it out now… ********************************** Passenger growth rates, indeed, proved true. But the business never offered significant returns. As Graham wrote, “In 1970, for example, despite a new high in traffic figures, the airlines sustained a loss of some $200 million for their shareholders.” And that’s the point of the opening quote. A great growth story does not inevitably equate to a great business. What was it that English entrepreneur Sir Richard Branson said? “If I was a businessman, or saw myself as a businessman, I would have never gone into the airline business.” Good point. Let’s hope, dear reader, you don’t make the same mistake. So take this. Yesterday, they offered you Pan Am. Today, they’re serving up Google. Same suits…same premise. “Growths rates and more growth rates,” they scream. Everyone uses Google. Maybe they do. So what? “Everyone” used to use Yahoo. That’s until Google came along. And within a lunch break, everyone switched to Google. It didn’t cost much. It didn’t take Madison Avenue. In fact, it cost less than your lunch. It cost nothing. Google may make a great growth story. But does it make a great business? I’ll let you decide. Until next time, P.S.: To make money in the stock market, I mean REAL money, you can do two things: Find the Googles before Wall Street (not as impossible as it sounds) or invest in under-the-radar opportunities that offer BOTH growth and great businesses. Recently, I added a position to my Free Market Investor portfolio that does just that. I can’t give it away here, but I’d be more than glad to let you in on it before it explodes. To be one of the few, check it out here… |
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| Christopher has spent the last two years doing investment research primarily focused on emerging markets, specifically China and Hong Kong. <click here for full bio> |
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