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Read the Official Merger Announcement:
December 18, 2007
Dear Friends,
To enhance our investment research resources and better position us for future growth, we have made the decision to merge the FindProfit newsletter with our sister site, the Bull Market Report ("BMR"). We are very excited about this news, as we have been loyal subscribers ourselves to the Bull Market Report for nearly ten years!
As of January 1st, 2008, FindProfit will no longer be a standalone newsletter. Subscribers will continue receiving the FindProfit Week In Review through March 31st, 2008 in order to cover existing positions. FindProfit subscriptions will be fully converted to the Bull Market Report along with bonus time.
Making the decision to merge FindProfit was not an easy one, but after publishing the newsletter for the past five-plus years, I feel this is the right next step for everyone involved. I am highly confident that the new Bull Market Report will continue to provide you with excellent investment content and ideas, as well as an impressive investment research team with whom I will remain in close contact. The Bull Market Report's investment performance has been outstanding, with one of the longest and most impressive track records in the business. Subscribers to both newsletters should benefit from this merger.
I am extremely proud of what we have accomplished at FindProfit. Since its launch at the depths of the 2002 bear market, FindProfit's model portfolios have averaged a compounded annual return of +17.06% versus the S&P 500's return of +9.42% and Nasdaq's return of +13.95%. Only one of our multiple model portfolios had a down year and that was to the tune of a modest one and a half percent! We have had many great winners, and learned many important lessons along the way that have only made us better investors. See below for some of our favorite memories and lessons learned.
I'm very excited about the future ahead with the Bull Market Report, and can't wait for you to see their great daily report, extensive investment Recommended List, and deep archives. Thank you so much for your support and business over these many years. It's been a wonderful experience, and I can't wait for this next chapter to begin.
Best of luck!
Sincerely,
William C. Martin
SUBSCRIBER NEXT STEPS
Effective immediately, your FindProfit username and password are valid at BullMarket.com. This will give you access to BMR's Recommended List, which includes more than 50 stock picks, as well as access to BMR's fully searchable archives.
You will also start to receive BMR's daily email report (typically sent around 5:30 PM EST every weekday), as well as special email News Flashes.
Your FindProfit subscription balance will be converted into an equivalent BMR subscription (fully adjusted for any price differentials between the products). In January, you will be able to access your updated account information online.
Additionally, you will continue to receive the FindProfit Week In Review every Friday via email until March 31st, 2008. You will also continue to have access to the FindProfit website during this time period, which will enable you to track our views on current portfolio positions.
The Bull Market Report Recommended List already includes eight of the FindProfit portfolio stocks, and it plans to add a number of additional FindProfit stocks. In addition, you will start to receive detailed coverage on the roughly fifty stocks that the BMR currently recommends.
We are very confident that you will enjoy and value the Bull Market Report, as it adheres to the same high-quality content and investment standards as FindProfit. We have shared resources and staff at times during the past year, so the transition should go smoothly. In addition, the BMR website and daily newsletter will soon be getting some exciting upgrades.
If you have any questions whatsoever, please don't hesitate to call our customer service department (1-888-278-5515) or email us at help@findprofit.com.
CLICK HERE TO LOGIN TO BULLMARKET.COM NOW!
ABOUT THE BULL MARKET REPORT
A daily email newsletter focused on long-term growth, value, and income-generating investments, the Bull Market Report provides investors with actionable daily market commentary and analysis. Its Recommended List of stocks has outperformed the S&P 500 since 1997. In 2006, the Bull Market Report exited 10 winning longtime holdings, booking an average return of 101%. Recent winners in 2007 include SRZ (+182.1%), AAPL (+89.9%), FDC (+81.2%), and ALL (+226.6%).
FINDPROFIT HISTORICAL HIGHLIGHTS
Launched in mid-2002, at the depths of the bear market, FindProfit's model portfolios averaged a compounded annual return of +17.06% versus the S&P 500's return of +9.42% and Nasdaq's return of +13.95%. Barring a late year meltdown in our two portfolios, we are proud that only one of our portfolios had a down year, and that the loss was only -1.62%!
BEST LONGS
CNET Networks (CNET) - Who can forget our first FindProfit stock pick way back in August 2002?! Purchased at 91 cents per share in the depths of the bear market, we bought more shares three days later for just 73 cents per share (that's how tough the market was that fall!). The stock bottomed for good days later at 65 cents, and we were able to sell out of the position only ten months later at prices as high as $6.92 per share!
Intermix (MIX) - The owner of MySpace, we purchased MIX (then Euniverse) in early 2004 at prices ranging from $1.65 to $1.90 per share when it was still a struggling pink sheets stock with a mash-up of various Internet content and commerce businesses. We later sold the stock at prices as high as $9.00 per share before it was acquired by News Corp. (NWS) at $12.00 per share.
Omniture (OMTR) - A broken IPO (that came to market in the wake of Vonage's deal), we stepped up in June 2006 and bought OMTR shares at prices as low as $6.74 before the market knew what it had missed. We recently sold the stock for prices as high as $32.82 in October 2007. We also double-dipped on our knowledge of the Web analytics space with our purchase of Visual Sciences (VSCN) (then called WebSideStory) at $11.16 per share in December 2006; OMTR recently agreed to acquire VSCN, and VSCN shares currently trade at around $16.00 per share.
Opsware (OPSW) - Purchased in September 2005 at just $4.39 per share, Hewlett Packard (HPQ) bought the company for $14.25 per share in July 2007. Not a bad trade!
- Financial Takeovers
Up until the last twelve months, we've had a good history of playing the financials. In October 2003, we made more than 60% when Fleet Bank was acquired by Bank of America (BAC); we made 40% in January 2004 when Bank One was bought by JP Morgan (JPM); we made 38% when Bristol West (BRW) was acquired by Zurich Financial; and we made 32%, on top of an earlier 216% gain, when E-Loan (EELN) was purchased by Popular.
Mission Resources (MSSN) - In addition to technology, we also made a lot of money playing the natural gas boom in the 2003-2005 timeframe, with winners including Pride International (PDE), Pioneer Natural Resources (PXD), Contango (MCF) and Western Gas Resources (WGR). MSSN was the highlight, though, as we made 195% on this turnaround of a small-cap gas company.
Intersil (ISIL) - We inherited a position in ISIL after the semiconductor company acquired Xicor (XICO) for $15 per share, or 212% more than the $4.79 per share that we originally bought XICO for in April 2003. We decided to hold our ISIL shares, and they have been solid - albeit volatile - performers since.
We could continue, with names like Activision (ATVI), Synaptics (SYNA), Liberty Global (LBTYK), Vivendi (V), Ameritrade (AMTD), RSA Security (RSA) (acquired), Redback Networks (RBAK) (acquired),
Web.com (WWWW) (acquired), Vitesse (VTSS), Infospace (INSP), and Investools (SWIM) dominating our all-time greats list. In general, we excelled at identifying early-stage and out-of-favor companies with compelling growth drivers.
BEST SHORTS
Movie Gallery (MOVI, now MOVIQ) - Topping our list of all-time favorite shorts, who can forget movie rental firm MOVIQ. We shorted the stock in early 2003 at $20.68 and $24.03 per share only to see it rise to above $34 in short order, before covering it at $15.28. Of course, MOVIQ now trades for just 7 cents per share after declaring bankruptcy!
Subprime - If there's one trend that we nailed, it was subprime mortgage lending and the real estate bubble. As far back as late 2004 and early 2005, we were questioning the market's increasingly loose lending standards and soaring real estate prices. For a taste of our thesis, see our January 2005 post: Why Accredited Home Lenders Is A Ticking Time Bomb (note that the founder of LEND liked to email and criticize our analysis while highlighting his disciplined lending practices). To profit from this, we shorted a number of lenders and originators with exposure to this trend, including Accredited Home Lenders (LEND), H&R Block (HRB), Fannie Mae (FNM), and Indymac Bancorp (IMB). In each case, we made good money. However, we never anticipated the complete market meltdown that we're seeing today - and we left A LOT of money on the table. Still, it feels good.
Imergent (IIG) - No list of great shorts is complete without mentioning IIG. We first shorted it in early 2005 at $18 and $25 per share, before covering our position in May 2005 at $12.05 per share. Unlike any of our other shorts, we felt that IIG was possibly an outright fraud with a "hard sell" business model that was constantly pressing regulatory limits. Also, the CEO liked to email us and taunt us about his rising stock. However, despite accounting restatements and numerous regulatory investigations, management has been able to keep juggling the ball. We remain skeptical of IIG, but think it's best to watch this spectacle from the sidelines!
Other successful shorts that come to mind include JupiterMedia (JUPM), LivePerson (LPSN), and Aptimus (APTM). We're also proud of our short of the ten year Treasury bond in May 2003, which at a 3.39% yield pretty much marked the bottom for yields in that cycle.
MISTAKES
Like no other business, investing is a game that is always humbling its participants. It's impossible not to make mistakes; the key is to quickly learn from them and to not let them kill you. Over our five and half year stretch, we made plenty of painful errors, all of which we would like to forget. Two "macro" mistakes that come to mind include our misguided bets on a variety of
telecom stocks in 2003-2004 (who can forget XO Communications!), as well as our more recent bets on a variety of financial stocks (including CFC, WB, COF, etc.).
What did we get wrong? In the case of telecom, while much of the industry certainly went bankrupt and rationalized itself in 2002 and 2003, we underestimated just how many bankrupt companies would be resuscitated by private equity and other investors. This led to an industry that still had far too many companies; only this time they could intensely compete with clean balance sheets.
In the case of financials, while we clearly nailed subprime and real estate and anticipated many of the credit problems that we're seeing today, we did not anticipate a 100-year credit storm, and we frankly whiffed in how we valued these companies. While valuations appeared low, we underestimated
how an even small change in credit quality can have a huge negative impact in an industry where the typical balance sheet is leveraged by around ten times. Looking forward, we will be much smarter about valuing "peak" financial earnings, as it is now very clear to us that these companies are deserving of an 8-10x multiple on peak earnings when they're going to have tough periods where they will write down one or more years worth of prior earnings.
LESSONS
After writing nearly 9,000 posts over the past 5.5 years, we could probably write a book about all of the lessons that we've learned. A few key points do come to mind, however:
1) Find Good Businesses: Some businesses are notoriously cyclical, tough to understand, or lumpy. Unless you're a pro, we think it's better to stick with simpler businesses with greater recurring revenue visibility. For example, we were burned one too many times trying to buy telecom equipment companies, which seem to always be missing quarters because they typically make one-time, high-priced sales to a small number of customers. That's the type of industry that's best to avoid.
2) Bet on Great Managements w/Integrity: Once you have a good business, it's important to find great managers with integrity. Great managers will be honest, work tirelessly to benefit shareholders, will be good at attracting other top talent, and will be intelligent capital allocators (i.e. they're buying assets at the bottom of the cycle, not the top). We've only been burned when we bet on second-class managers that we don't fully trust or who are really working to line their own pockets.
3) Be Careful of Betting on Second Place: As value investors, we've often been tempted to buy the second- or third-place player in an industry, often because of the wide valuation discrepancy between first and second. While sometimes this will pay off, as we saw with Visual Sciences, it's important to understand that the market likes to provide capital to winners. That access to capital often translates into a virtuous cycle, as smart managers can use that capital to accelerate growth and increase bottom-line returns.
4) Trust Your Gut: If something doesn't smell or feel right, sell the stock and evaluate from the sidelines. We've only had bad experiences when we sat on our hands. Note that this doesn't mean you should panic (we've often gotten better prices by waiting a bit to sell after an earnings warning), but being able to tell the difference between transitory and permanent loss of capital is important.
5) Wait for Your Pitch: This may be the hardest lesson, as it requires patience and conviction - particularly when the market is running hot, or running scared. We've found our best buys are usually made when they hurt the most, and vice versa for sells. Use volatility to your gain. In contrast, our worst ideas are usually the ones we "force;" i.e. the valuation or business may not be super compelling, but we have nothing else to buy and we're feeling envious of others' profits.
Good luck and I look forward to continuing to help provide great stock picks!
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LEGAL TERMS/DISCLAIMER:
Neither Indie Research, LLC nor FindProfit are registered investment advisors, broker/dealers, or research analysts/organizations.
Readers are advised that the commentary and reports on its website and in its newsletters are issued solely for information purposes and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. The opinions and analyses included herein are based from sources believed to be reliable and written in good faith, but no representation or warranty, expressed or implied is made as to their accuracy, completeness or correctness.
YOU SHOULD VERIFY ALL CLAIMS AND DO YOUR OWN RESEARCH BEFORE INVESTING IN ANY SECURITIES MENTIONED IN FINDPROFIT'S NEWSLETTER OR WEBSITE. INVESTING IN SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. YOU MAY LOSE PART OR ALL OF YOUR PRINCIPAL INVESTMENT.
Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report should be independently verified with the companies mentioned. Neither Indie Research, LLC, nor its officers, directors, partners, contributors or employees/consultants, accept any liability whatsoever for any direct or consequential loss arising from any use of information on this website or any use of information in its newsletters.
It should be noted that Raging Capital Fund, LP is a private investment fund managed by an entity controlled by Bill Martin, Raging Capital Management, LLC. Raging Capital Management, LLC, Indie Research, LLC, and each of their respective managers, clients, its officers, directors, partners, contributors or employees/consultants may on occasion hold positions in the securities mentioned in its FindProfit's website and in its newsletters. A current list of their common stock equity holdings is available here.; in all instances, relevant positions are appropriately disclosed at http://www.findprofit.com/holdings.php. However, these positions may change at any time. Please note that neither Indie Research nor any of the FindProfit staff does not receives compensation of any kind and will never take any compensation from for mentioning a company any companies that it mentions on its website and or in its newsletters.
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