I gather among some of our circle a disgruntled sense that in a time of war--with oil prices spiking and an ascendant Presidential candidate espousing protectionism, tax hikes, and technophobia, and with the semiconductor stock index down some 35 percent--the GTR has failed to generate high returns.
At the same time, many of the complainants rebel at the high risk of GTR stocks. Thus they refuse to buy the ones that go up, such as Essex, LNOP, Qualcomm, SYNA, NSM, and even Corvis. And they chastise me for pointing to companies such as Centillium (CNTL),
ESST and Avistar (AVSR) that have nipped my noggin for their technologies but lack ironclad quarterlies. Yet a main reason for my presence on the board is to give you a sense of my current interests in companies that I may well ultimately reject after closer scrutiny,
usually with major help from Charlie Burger who combines the technical insights of a physicist with a new mastery of financial analysis. I also benefit from the reactions of the board. If I had to research all my posts I could never join the lounge. It is a lounge and I
come here, as most of you do, to exchange noggin notions.
As a way to explain my thinking, I will tell you some of my own financial story over the last year. Although I do not recommend that people follow my own pattern (heavily influenced by the incidence of heavy tax bills from phantom earnings of yore), I think my own results
reflect what was possible during this period following the general guidance of the letter (with help during the early period from Whitebox as well, then part of our offering).
Over the course of 2004 so far (all in noggin estimates), I sold half my NSM at 42 (it had more than tripled), all my Applied Materials at 19, and all my Qualcomm at 68 and bought CORV at 52 cents, LNOP at 6.50 and IFLO (from Whitebox, then still part of the GTR offering) at 10.50. I also bought SNCI with both hands and lost a third of my money (I have still not sold). I bought a dollop of my Qualcomm back at 68 or 69 again on a dip about two months ago. I came out of this period with the vast bulk of my taxes paid and with my personal portfolio up some forty percent since the tax transactions in April, all while my favored industries crashed. Thoughout this period, I posted on the board about these sales and purchases before I made them.
My general rule is to buy on weakness. Thus I did not buy Essex or LNOP at $10 or IFLO at 15 or Corvis (CORV) at $2.00 or QCOM at $80. But weakness is your friend.
It is good that Corvis is 80 cents again. Nothing significant has changed. It is still very risky, and still a likely 10 bagger as Internet traffic in the US follows the pattern of Asia.
LNOP, which I picked several years ago when it had some 50 serious competitors and no customers, now has just two or three competitors and 42 customers including all the leading router companies in the world's fastest growing market, China. Judging from the US pattern, China will be buying some 500K routers a year. LNOP is now a major China play as well as a network processor champion. Bret Swanson, who has followed the company closely from the beginning, will be writing about its exciting prospects soon.
When I chose Synaptics (SYNA) its market was 60 percent of the 100 million laptops sold annually, and Foveon, of which it owns 16 percent, was an unproven chip. Now Synaptics'
market is the some one billion cellphones, iPods and imitators; and Foveon's chip, though delayed in a frustrating way, is increasingly recognized as the paradigmatic imager for the future.
National Semiconductor (NSM) has been up and down. Now it is partly down again. It is a major analog player and it owns nearly one third of Foveon. Analog is good. There are one tenth as many analog engineers and digital engineers and every digital device must have analog interface to the real world.
When I chose Essex, it was a tiny company with a trove of analog optical inventions and expertise and little revenues or profits. All its numbers have about quadrupled while its price is up 40 or 50 percent.
I have also bought some safer stocks with pardigmatic promise, such as Altera. I am seriously contemplating Cepheid, Linear Tech, Microvision (MVIS), Novellus (NVLS), Centillium (CNTM), and Terayon (TERN). I am awaiting IPOs from Xanoptix and Foveon. I
hope to find more companies. But listening to the technologies that I have been describing in the letter, I have recovered almost completely from the days when Global Crossing and Globalstar were two of my heaviest holdings, which I never sold, and when my letter nearly bankrupted me. Hang in there, folks.
--GG |
