The following was posted on Bob Brinker's Moneytalk board on AOL by me on Jan. 16, 1998.
Bob,
Let me say first that you were the one who showed me the advantages of investing in index funds. They provide tax-efficiency, a low cost way of investing, and the performance is better than most actively managed funds. (Thank you). Furthermore, I agree with your comments that mutual fund managers are in denial when it comes to being able to beat the market consistently. Bob, there is no doubt that you have a vast knowledge of financial matters and I have no intention of taking that away from you. My contention, however, is that you might also be in denial when it comes to thinking that you can outperform the market with your stock selections.
Two weeks ago, you had a caller ask you about Ascend Communications and Seagate Technology. He said his broker recommended these stocks to him recently. ASND at approx. $40 and SEG at approx. $35. You quickly made the comment that SEG is a "teenager" and went on to say that the caller should fire his broker and I believe you suggested he should look at index funds as a better investment vehicle. I thought this comment was premature.
Bob, you made your first mention of UTEK on the Nightly Business Report. The date was May 31, 1996. Here is the text from the transcript:
KANGAS: Any individual stocks, new ones that you would buy at these levels?
BRINKER: There are great small cap ideas and in the technology area, particularly, Ultratech Stepper, which manufactures photolithography systems.
KANGAS: Symbol?
BRINKER: UTEK on the Nasdaq 25.
KANGAS: Okay.
BRINKER: And this company is making systems for the manufacturer of semiconductors and thin film that's also for disk drives. And outstanding outlook, rapid growth, and I think it's very attractive.
Within weeks UTEK hit a low of $14 on July 15, 1996. I remember you blasting across the airwaves that UTEK was a "ROARING BUY" under $20. And it may have been, but I didn't forget that you first recommended it at $25 on NBR on May 31, 1996. You went on to finally recommend UTEK in your newsletter in July of 1997 at under $24. And then, most recently, you recommended UTEK in your October newsletter at under $30.
You said, "...and we now rate UTEK shares 'buy up to $30' should short-term weakness occur." Well, sure enough short-term weakness occurred. In fact, on October 17, 1997, UTEK closed at $29.25 and, to your credit I'm sure, UTEK opened the following day at $33. (I wonder how many MoneyTalk Treckies saw the close below $30 and called in an order to buy at the open...?) You also made mention of UTEK for the second time on Nightly Business Report on October 17, 1997. Here is the text from the transcript:
BRINKER: Yes. Ultratech Stepper is, I think, a special situation in capital equipment. They have a new process, Paul, "P-Gild" which is an advanced laser thermal processing tool for semiconductor manufacture in the smaller geometries. This is a big potential market. Could be a $2 billion market within a few years. They have other new products. They have a new mask-making division, Ultrabeam. They'll be coming in in '98. And they have a new pole-trimming tool, which is used for disk drive manufacturers. Saves a lot of money for the manufacturers in that area. I think Ultratech Stepper would be my single best purchase at this point. I would recommend buying that stock right in here tonight, in the 29-and-a-fraction area.
KANGAS: OK. That's U-T-E-K.
BRINKER: Yes. UTEK.
KANGAS: NASDAQ.
BRINKER: NASDAQ.
Bob, you said UTEK "would be my single best purchase at this point. I would recommend buying that stock right in here tonight, in the 29-and-a-fraction area." Well, Bob, you virtually picked the top. UTEK opened the next day at $33 and it went as high as $34.125 the following day, but that's it.
I feel the need to post these facts because it seems there are many of your listeners who feel that you are currently recommending UTEK at $17 and have no idea of the other untimely recommendations that you have made regarding UTEK. And the reason they believe this, Bob, is because you with all due respect are a "Spin Doctor" when it comes to your stock selections.
Shortly after the start of the Asian crisis when UTEK was at $27.25, you stated in your November newsletter very specifically, "We do not view the current problems in Southeast Asia as a major problem for Ultratech Stepper." In that same issue you said, "In the interim, we suggest that subscribers use any short-term weakness in the mid-to-high twenties to scoop up bargain priced shares while the opportunity exists." I also remember you talking on the radio in November saying that even though there might be pricing pressures in the chip manufacturing industry due to the Asian Crisis, you contended that those companies still needed the equipment to build the chips and remain competitive. Hence, UTEK shouldn't be effected.
Furthermore, I couldn't believe you said in your January issue, "An exceptional buying opportunity could occur in our view if short-term disappointment in fourth quarter earnings creates share price weakness toward the 1997 low of $17 per share...We continue to recommend purchase, especially on weakness." HELLO BOB..., what about the weakness you said we should have taken advantage of in October under $30 and the weakness in the mid-to-high twenties in November. Is it the same weakness that made you like this stock under $30 that now makes you love it around $17? How many times have I heard that statement from brokers....If you liked it at $30, you've got to love it at $17....Come on, Bob, you should know better than that!
Also, in the first week of December (UTEK closed at $25.5), a caller asked you if you were still positive on UTEK...your response was, "ABSOLUTELY." Today UTEK is at $19 11/16. Anybody following this advice must be running out of money to take advantage of this persistent weakness, Bob. Don't you agree?
I know full well that you advise limiting individual stock exposure to 4% max. of equities, but you didn't advise dollar-cost averaging into UTEK at $30, Bob, you said "it would be my single best purchase at this point...."
Finally, let's look at your performance since you first recommended UTEK on May 31, 1996, at $25. An investment in UTEK purchased at $25 on May 31, 1996, would be down over 21%, today. That compares with a return in the S&P 500 of over 43% in that same time period, excluding dividends, of course. Negative 21% versus positive 43%. Even worse, anybody who followed your advise in October and bought UTEK under $30 would be down over 34% in just 3 months. Is this the way a "ROARING BUY" should perform, Bob? I don't think so...
Wow, don't you think investors would have been better off in an index fund than following your recommendation on UTEK. This is the advise you gave that caller two weeks ago when he asked you about ASND and SEG, isn't it? Now I know, Bob, this is a long-term investment, but you never considered that ASND or SEG was a long-term investment when you made the suggestion he should fire his broker. What if this is just short-term weakness in the shares of ASND or SEG? Why shouldn't he buy ASND or SEG on weakness?
Stop putting a positive spin on this recommendation, Bob. UTEK will eventually go up, but your timing has been the worst. You were definitely early on this one. Your spin on how UTEK will eventually hit $40 in the long-term is ridiculous. If you are not going to acknowledge that you blew the timing on this, then what was the big deal about waiting to buy under $30. If UTEK becomes a huge winner will it really matter if you paid $30 or $34. I'm willing to assume that you wouldn't have recommended UTEK at $30 in October, if you thought it had a chance of going to $17 by January.
The fact of the matter (just like you taught me, Bob) is that individuals, including mutual fund managers, can not time or outperform the market consistently. Not even you, Bob. Again, I realize you recommend index funds, but why even bother trying to outperform the market with stock picks. Is it human nature, Bob? Did you think you could outperform the market?
BTW, I do not own UTEK, ASND, or SEG.
Thank you, Bob, and I'll be listening.
Rillinois |
