[TGW]The observations that you noted in your post are not the basis that I would use to evaluate this or any stock.
[BRM]That is very interesting that you do not consider quality of management, industry, growth, risk management, or beta as part of your investment criteria. Just out of curiosity, what DO you use???
1. Solid Management (Gary Borglund)
[TGW]I don't believe you have any direct information that would allow you to make that determination. What previous companies has he been CEO of? What was his track record? Does he have previous experience in the Internet gaming and software areas?
[BRM]Just because this is first CEO position doesn't mean he isn't solid. Timothy Koogle's first CEO position, barely out of diapers, he created a multi-billion dollar company overnight! I base my determination on what he has accomplished under the circumstances. My DD so far has served as validation.
Works hard, several deals are in the works concurrently
[TGW]This may or may not be true since that only information we have is from press releases.
[BRM]At least two of the deals have been confirmed with third parties.
[TGW] Unlike most other companies GLOW does not publish any type of information to its stockholders.
[BRM]If you mean, "unlike SOME PUBLICLY TRADED companies GLOW publishes LIMITED information", I agree. However, I expect that to change in the next 30 days.
[TGW]I don't know what you are referring to. Mr. Borglund appears to have been president of GLOW during the Wolf Key fiasco, and several others.
[BRM]The information I have is that Mr. Borglund was not involved in contract arrangements with the Toronto group.
[TGW]What information do you personally have that suggests that it was Borglund and not Jamieson that made that decision?
[BRM]Because the decision was not made until after Borglund assumed control.
[TGW]Here again what information do you personally have that would suggest this viewpoint is correct? He has not followed through on a single press release to date.
[BRM]Actually, he has followed through on absolutely everything he has said so far. I have a little more patience that most because I know what it is like to run a small company. Additionally, I understand what the words "expect to" and "approximately" mean.
[TGW] What happened to the "unwinding" of Wolf Key?
[BRM]What do you mean "what happened?" It's being unwound! It was announced only 3 weeks ago! It usually takes a helluva lot longer to get out of a deal like that than it takes to get in.
[TGW] What happened to Burnt Church?
[BRM]The contract will be signed shortly. On May 22nd, GLOW estimated that the new facility would open mid July.
2. Marriage of two great industries!
[TGW]You can not use projections for an industry or sector as a basis to invest in a company.
[BRM]Please tell me you are kidding. I can't believe I have to explain this to you! Often times, an industry gets "hot" and every company in the industry benefits. Take a look at the "internet computer services" sector for example. AOL, YHOO, SEEK, XCIT, LCOS, etc. are like a bunch of lemmings. They have all been screaming north the past several months. Over the last 12 months, each stock has grown by between 4X and 7X. It's not the companies, it's the industry sector!
[TGW]It is how well the specific company adapts to the challenge, dominates the industry, and creates revenue that is important.<
[BRM]Oh...yeah, right! Yahoo's TTM revenues are $115 million - they're a $9 billion company!!
3. Ground floor
Market capitalization is $10-$15 million, it is far easier for a $10-$15 million company to quintuple in market cap than it is for a $100-$150 million company.
[TGW]More smoke and mirrors. Who cares what the capitalization of the market is, its what the specific company is doing that is important.
[BRM]Once again, I can't believe you would make such a statement! "Who cares about market capitalization"?!?!?!? Let me get this straight. You determine your investment solely on what the company does without regard to the market value as compared to other valuations?!?!? So, in other words, since Microsoft is the number 1 software company, you'd still buy the stock with a market cap of $3 trillion and PE of 700???
[TGW] GLOW has not had one documented success that is producing revenue.
[BRM]So what? Two years ago YHOO didn't earn a penny either! They're now a $10 billion company!!!! To base your sole investment criteria on past performance is not only dangerous, it is excessively myopic. True value of a company isn't "what did you do for me yesterday", it's "what are you going to do for me tomorrow".
4. Very limited downside
Based on Friday's closing price, the worst I could do is lose $.25 per share
[TGW]That is undoubtedly the worst of your observations. When an investor has a $25K invested in a stock does it make a difference whether the stock is at $.25 or $25 a share.
[BRM]I cannot believe you would make such a statement! In stock market analysis, does the term "beta" mean anything to you? Micro-caps have inherently higher beta - they are much more volatile! I can only lose 100% of my investment. However, I can make much more than 100%.
5. Huge upside potential
This stock easily has the potential to be a multi-dollar stock in the next twelve months
[TGW]One of the worst observations and the basis of most of my posts. That is the worst type of hype, fantasizing your personal opinions and stating it as fact.
[BRM]You obviously have no clue what the definition of potential is. So, I'll define it for you. . .
Main Entry: 1poútenútial
Pronunciation: p&-'ten(t)-sh&l
Function: adjective
Etymology: Middle English potencial, from Late Latin potentialis, from potentia potentiality, from Latin, power, from potent-, potens
Date: 14th century
1 : existing in possibility : capable of development into actuality <potential benefits>
By saying my statement is incorrect, you are stating the stock has no possibility of becoming a multi-dollar stock. You have admitted yourself that your have no information about this stock so I don't know how you can make such an assertion!
[TGW]How did you calculate this "potential", and what numbers did you use? I am sure everyone wants to know. I know I do.
[BRM]Using available information, I estimated current earnings, developed a current PE and an earnings growth rate, backed into the stock price and multiplied it by 20% to account for errors. I still ended up with a multi-dollar stock!
6. Bargain price, the stock price is depressed because.
Past management (we now have new management)
[TGW]What information do you have that management has changed?
[BRM]A press release and information directly from the company.
[TGW] And one person does not make a management team! Borglund has been president for some time, are you telling me that he did not know what jamieson was doing?
[BRM]All I'm saying is he didn't have any control over what Jamieson was doing. It doesn't matter if he knew it or not, there is nothing he could do about it!
Lack of information (I consider this to be a huge opportunity, especially in light of the company's plans to become fully reporting)
[TGW]Now I am starting to get some insight into your investment style. I call this the ostrich style of investing. The more information that is lacking the higher premium and potential you place on a stock. You have to be pulling my leg on this one, aren't you????
[BRM]TGW, I have explained this exceptionally basic tenet of investing to you on numerous occasions. Apparently, you are really stupid or I haven't done a good job explaining it to you. I will assume the latter and try once more.
The basic tenet I just referred to is the "Efficient Markets Theory" (EMT). It postulates that it is not possible to make "consistent long term abnormal returns" in the stock market because of the concept of "perfect information". In theory, since investors have access to the company's material information at the same time (no one has the "information advantage") no one has advantage over anyone else - the market sets the price based on all available information. I do not believe in EMT - I wrote a thesis on it while pursuing my MBA. I believe there is imperfect information - and with imperfect information, there is incredible opportunity for abnormal returns. Generally speaking, the smaller the stock, the less it is followed and the more imperfect the information. This is taken even a step further with GLOW because an investor cannot use the normal methods of retrieving information. It requires additional work. Information is extremely imperfect with GLOW.
There is another factor that comes into play here. That is information risk. You are aware of it, I know, because you have repeatedly alluded to it. Since there is very little independent information available on GLOW, the stock is much riskier. "All we have to go on are company press releases." With risk comes a price. The riskier the stock, the lower the stock will be priced. If you can eliminate some of that risk by getting information that the market may not have fully processed yet, you can increase the value of the stock without increasing the price! Voila! You have a GLOWing situation!
7. Is an excellent fit within my portfolio.
Most of my holdings are "blue chip" stocks such as WCOM, INTC, MSFT, LVLT, etc.
[TGW]How do you fit a highly speculative stock in with WCOM?
[BRM]I now know you have absolutely no concept of beta. My risk tolerance is higher than some. However, it is not the risk of an individual stock that is my concern, it is the risk of my portfolio. By mixing my stocks properly, I can diversify away a significant portion of that risk. You see, TGW, beta risk is diversifiable. I can take two risky stocks that, when summing the parts, equals significant risk. However, when taking them as a whole, there is relatively little risk. That is the concept of beta risk. My blue chips have a beta close to 1, my GLOW has a beta with an absolute value that is significant. As a whole, there isn't much room for additional diversification of risk.
[TGW]If this is your investment style to purposely risk your capital
[BRM]ABSOLUTELY!
[TGW]Capital preservation should be every investors number one priority.
[BRM]If my only priority were capital preservation, I'd have my entire portfolio invested in GNMA funds. As it is, I'm at a young enough age where I can afford to heavily emphasize growth.
I needed a good "high risk"/ "high reward" stock like GLOW to bring my average portfolio risk to where I like it
[TGW]Another oxymoron, high risk translates to high reward. What book of wisdom did you get that from? The two events are mutually exclusive.
[BRM]WHAAAAAAATTTTT?!?!?!?!?!? MUTUALLY EXCLUSIVE??????? What are you talking about? There is absolutely positively a direct relationship between risk and reward. Very simply, If I buy a lottery ticket, the risk is very high (about 99%?) I will lose my entire investment. However, the reward is, I'll either get my investment back (~1%??) or make $125 million. On the other end, if I invest in a passbook savings account, the risk is virtually zero, however, the reward is I'll only make ~4%. It isn't an accident the numbers work out the way they do!
CONS
1. Lack of operating history - however, the industry itself is in its infancy.
[TGW]Again you gave a con, and a false observation. The industry may be in its infancy, but that has nothing to do with GLOWS lack of operating history. BING is only one year old but they have filed several forms 10's.
[BRM]Lack of operating history has nothing to do with form 10's!!!!!! My grandfather owned a lumber yard for fifty years. . .he had fifty years of operating history. . .he NEVER filed a form 10!!!!
2. Lack of available information - I personally consider this opportunity since, once information does become available, the risk will be substantially reduced which will correspond with a significant increase in stock price.
[TGW]Boy! This is getting tougher. How do you extrapolate a lack of information on a company to a large potential upside if it ever becomes available? Wow!
[BRM]I explained this for about the 20th time in great depth with my discussion of EMT. Please review.
3. "Vapor contracts" (no contracts have been finalized yet) - This con should be eliminated in the coming weeks.
[TGW]How is it going to be eliminated in the coming weeks? By releasing more press releases on other potential contracts?
[BRM]By finalizing some of those contracts.
4. Skeletons in the closet - Gary seems to be handling them well, we'll know more with the release of the 10-K.
[TGW]Aha! Finally some meat! What are the skeletons in the closets? Skeletons spell trouble.
[BRM]EVERY company has skeletons in the closet.
[TGW]OK time to produce. Bob Davis of the napeauge Letter asked for information like this and everyone feigned being deaf and dumb. What did your DD reveal?
[BRM]I have answers to most of Bob's questions. I am attempting to confirm my understanding through DD. I will let Bob know once I am completely satisfied that I have correct answers to all questions.
T.G.W., not using sarcasm is not fun. This is my last post without wit.
GO BIG RED!!! |
