Wednesday, April 15, 2009
(Cont'd from above)...

Jim (cont'd):

Back in December of 1999, the SEC passed a rule… it is called Regulation FD… this rule is set up to benefit you… it says that any information that is made available about a company, needs to be made available to everybody… everything that can be known about a company without being an insider needs to be readily available to all investors… the web really helped us… but before FD, it was really bad for you… I don’t know if I would have been able to do this show before FD… because I would have been encouraging all of you home gamers to get into the market, and then the people who had far more access to more exclusive information could have eaten you for lunch… it used to be that you had to be a super rich client of a major firm to get research, and you had to go down to the public library as I used to… and look thru microfilm to get quarterly filings that were typically really late and old… it is not true anymore… things are more democratic now… thanks to Reg. FD, and the internet… so that is the first thing that you need to know… there is no information out there that you can’t get your hands on that can be traded on… it is possible to do homework that is equal to or better than what a lot of Wall Street analysts produce… you can do it… so what is the process.

First, whenever you are checking out a company you want to take a look… this is how we grade companies, just like in school… quarterly filings… and you also want to see the annual report… don’t know how to get it… go to www.sec.gov… just type in the ticker symbol of the company that you are looking for… everything that they are required to disclose is right there on the website… boy it is easy now… looking at the quarterly reports, at the 10K reports, the annuals… critical, critical part of the homework… these reports will tell you how a company actually makes its money… and that is really important… if you don’t know how a company makes its money, who it makes its money from, you can’t tell how eroneous events will affect the stock… these SEC filings are also important because they explain a companies business model… how they make money… you might think that you understand a business… but then you read the 10K and you realize that you did not have a clue.

For example, do you think Marvel Tech (MRVL) makes chips for various high tech gadgets… but what does that mean… do they actually make chips… do they have a big semi-conductor factory or foundry… or do they just design the chips and contract out to another company, like a Taiwan Semi, to actually make the chip… important distinction… you can make a lot more money if you don’t have to make the chips… well, it turns out that they just design the chips… and that is where a distinction can affect how well a company will do… so you need to understand it… you get that info from these SEC’s filings.

Other than filings with the government, there is nothing more important than listening to the companies quarterly conference calls… if you can’t listen, or follow them on the web… then don’t own the stock… every quarter a company is required to have conference calls at the same time that they release their earnings reports… on these calls management takes calls from analysts and shareholders… the conference calls can be very illuminating but they can also be up to an hour and a half long.. tough luck… they are where you get the best possible information about a company… about how its business is doing… about where it sees itself in the future… too many people skip this step because they think it is boring and time consuming… and that is a shame… and again, you shouldn’t be owning the stock… I would never even consider owning a stock without having already listened to several conference calls… when I own a stock for MCTAAP… I am on every conference call… it is painful, it is boring… but I am on it… you need good information, and the conference call is where you get it… and you know you can read the transcripts if you don’t have time for the call… if you don’t have a lot of time, or you are feeling lazy, I like to read the transcripts and not be on the call… there is no excuse to not have either been on the call or read the transcript.

Here is the bottom line…

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The Bottom Line!:     This is just the beginning when it comes to doing the homework and knowing your stocks… when we come back after the break, I will tell you specifically what to look for when you go thru the conference call, and the research, and the reports… I will tell you what your eye should follow if you want to try to make mad money. Invest like a pro! Do your homework, get SEC filings & listen to the conference calls.

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    I have heard you say on many occasions that if you are going to invest in individual stocks that you should be prepared to spend a minimum of an hour a week doing the research. So, my question is, whether you spend 1 hour a week on each stock, or ten hours, some of that could be a complete waste of time. What are some of things that you would consider to a complete waste of time in doing research on stocks?

Jim:    Well, I have got to tell you… a lot of the times I think that the Wall Street’s research is a complete waste of time… there can be lots of different insights that could be gleamed… but their recommendations whether they like it or not is probably irrelevant to your choice… so I don’t want you to be swayed by them… it is like going to a movie, reading the critics report, and the critic hates it and you like it… I want you to like what you own… maybe ignore some of the critics.

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Q:    I watch the NBC and they have all day, every day they have these suits there, these prognosticators, these gurus on there with the market will do this, the market will do that. Like the market has a conscience. They are the market, you are our only defense. So how do we know what these guys are thinking because if they don’t know what is going on, how in the world are we supposed to trade?

Jim:    These proctologists… I mean these prognosticators… are often people who are looking in the wrong direction so to speak… the problem is, is that they are trying to get your assets… they want your commissions or they want your money… what do I want… I want nothing… so if I screw up it is because I make an honest mistake… I don’t tell you to buy or that I like this stock because I own it… I just say, I like this stock or not because I am trying to use my judgment… that is why you have to take all of them with a grain of salt… I think your judgment is right.
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Q:    Where can I get information on conference calls?

Jim:    Well, you can get it pretty much everywhere… I like to go to the websites of the companies, they have got all of them listed there and then I get to look at the press releases too… I think that is a great way to go… there is a lot of different sites… CNBC.com can direct you there, TheStreet.com, where I am chairman can direct you there, Yahoo Finance… there is a ton of ways to get it.
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Q:    Weeks ago I followed your advice and I kept taking 20% off, and now I have mostly cash in my broker money market fund and it is paying about 2%. Is there a better place to park that money until the market turn around?

Jim:    Do not risk it… do not reach for yield in this environment… it is difficult enough… I do believe that there will come a time when I will feel safer… and I would tell you that I would think that there will be a time when I am a little bit less risk adverse… but that time is not now… I am not going to recommend a cash alternative to the one that you are in.
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[verbatim recap]

[end of segment]

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