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Monday,
April 13, 2009
(Cont'd from
above)...
Jim (cont'd):
That is why you
need rules… and
you need to obey
the rules… this
goes for me to…
to prevent you
from making the
mistakes that
come naturally
in
Stay Mad For Life,
I have a rule…
it is called
love the
product… don’t
love the stock…
that may seem
elementary… even
insulting… of
course, you know
that companies
which make
something great
don’t
necessarily
translate into
good stocks… but
believe me, you
will make this
mistake as I
have… unless you
are constantly
guarding against
it… this usually
happens with
tech stocks… and
with me it was
no different…
you have to be
careful with
these, because
they seduce you
so easily…
I fell in love,
came in love
with a stock
called Citrix
Systems back
in 2006... this
is when I still
had my radio
show Real Money…
and you have to
know a little
something about
radio to
understand why I
fell so hard for
this one.
A lot of the
radio hosts like
to have someone
in their ear,
telling them the
name of the
caller and where
they are from…
but me, I
couldn’t stand
the incessant
chatter in my
ear… I didn’t
want to be
distracted… so I
went to my tech
guys, the
experts… and
they said that
they had a brand
new solution… is
was a product
called GoToMyPC…
it was made by
an outfit called
Citrix, that
allowed me and
the telephone
operator see the
same thing on
our monitors… so
I could just
read the name of
the caller
without having
anyone distract
me in an
earpiece… the
difference was
miraculous… I
had never heard
of this product…
I had no idea
that it existed…
so I went out
and I researched
all of the
public filings
of Citrix… and
since the
company looked
so strong, I
leaped in and I
bought it for
my charitable trust…
my
experimentation
game… at $43,
spring of 2006.
I thought that
everyone would
adopt this great
product…
everyone who
needed remote
software… and
guess what
happened… the
next quarter,
Citrix reported
a slower growth
in the sales of
this very
product that I
was in love
with… why, turns
out that
everyone who
wanted it
already had it…
even though my
tech experts
said that it was
brand new… I was
actually late in
the product
cycle game… I
was at the tail
end of the
customer base… I
thought that I
would be in the
van guard.
Now, if I had
thought a little
harder about the
product, which
had been around
for 3 years when
I bought the
stock, I would
have known
better… tech
product cycles
are short… any
tech product
that has been
around for 3
years has
probably peaked…
and after that
it is all down
hill for the
stock.. unless
it has some new
product to keep
driving the
stock higher… I
had to sell the
Citrix 10 points
lower… not
because I was
wrong about the
product… no, the
product was
great… but I was
wrong to think
that it was new…
in the course of
your investing
career you will
be told by
countless
experts that
they have just
heard about this
great new thing…
this happens all
of the time…it
may be great…
but you can not
count on the
experts to know
if it is new…
you have to
check that out
yourself…
because if it is
not new, if it
has been around
for a long time…
you are jumping
on a band wagon
that is about to
go over a cliff.
Here is the
bottom line…
▼ ▼
▼ ▼
▼
 The Bottom Line!:
A great product does
not make a great
stock… and just
because you have
just discovered
something that is
really good… that
doesn’t mean that
millions of other
people have not
already discovered
it... Great products
don’t always
translate to great
stocks - be sure to
do your research.
[verbatim recap]
[end of segment]
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