From the globe and mail:
Electronics CEO closes eyes with
buy-and-hold strategy
BRENT JANG
Saturday, October 28, 2000
CALGARY -- David Snell knows first-hand about investor anxiety in
the technology sector, both in selling a stock too early and in hanging on
to a stock that collapses.
Mr. Snell, vice-chairman and chief executive officer of Calgary-based
Electronics Manufacturing Group (EMG), sold his Wi-LAN shares
in early 1998, fetching an average of $6 a share.
As fate would have it, he dumped his shares in Wi-LAN, the
Calgary-based wireless technology company, just before they rocketed
up to $30 late last year and peaked at $94 in March on the Toronto
Stock Exchange. Wi-LAN has slumped since then to trade back in the
$30 range -- still considerably higher than when Mr. Snell bailed out.
Despite pulling the ripcord early, Mr. Snell has comforted himself with
the knowledge that he made a tidy profit on Wi-LAN -- enough to help
him pour $2-million into expanding EMG in mid-1998.
EMG, which makes electronics hardware for customers in the wireless,
telecom, computer and automotive sectors, has grown rapidly. Mr.
Snell's portfolio has thrived, too. His 13.5-per-cent stake in EMG is
worth $12.46-million, based on yesterday's close of $5.10 on the
Canadian Venture Exchange.
He also holds 365,000 shares in Cell-Loc, a Calgary-based company
developing technology to pinpoint a cellphone's location. Shares in
Cell-Loc, a sister company to Wi-LAN, traded around $10 a year ago,
but soared to $80 in March.
Unfortunately, Cell-Loc stock has plunged to about $20 on the TSE. In
hindsight, it would have been wise to unload some of his shares at $80.
But Mr. Snell made the decision beforehand that he would be in
Cell-Loc for the long haul.
While he stressed that it's best for investors to set their own goals to
match their risk tolerance, he personally favours a long-term investment
philosophy.
"My advice is that if it's a sound business model, invest and close your
eyes," said Mr. Snell, who formerly served as Wi-LAN's
vice-president of production and Cell-Loc's vice-president of corporate
development.
"But if you have an exit strategy, if you know what return you're looking
for, be happy if you achieve it. Don't regret leaving money on the table if
you've actually met your objective."
While the buy-and-hold strategy may seem woefully outdated in these
turbulent markets, Mr. Snell said long-term investors aren't extinct. For
those who buy into a company's vision, sticking with a stock through
thick and thin still seems less risky than day trading.
Nortel Networks is a prime example of a company with a strong
business model in fibre optics, even though investors have punished
Nortel shares because third-quarter revenue came in at the low end of
forecasts, he said. "Try to understand Nortel's business plan, and if you
believe in it, don't worry about the ups and downs. Ride it out."
Since EMG's first public financing came out at $2 a share last
November, its share price has been choppy, hitting a record high of
$8.95 in February, but trading under $5.50 in recent weeks.
Mr. Snell, 34, portrays his company as a miniature version of
Celestica, the contract manufacturer of electronics components based
in Toronto.
An electrical engineer by training, he checks EMG's stock price only
once a week. "If you follow it every day, you're focusing on your stock
price when you should be focusing on building your company."
That doesn't mean he's always a cool cucumber when he learns about
stock drops. "I've had a few stomach flips. I'm human, for sure."
bjang |
