Lazy Man and Money

Analysis of My Best and Worst Investments

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A couple of years ago, I decided to take a small portion of my retirement and actively invest it. Unfortunately, I didn’t do it in such a way that I can easily gauge performance. Fidelity’s tools aren’t all that great (or maybe it is that I can’t find them), but it is further complicated by the addition of new cash.

I’m kicking myself for setting up something so flawed. At the same time, I don’t know how I would have done much better. I don’t want to change my whole retirement structure so I can report performance on the blog (though it would be worth knowing for myself).

Like every stock-picking investment to date there’s been some good and some bad. I thought I’d review them and see what, if anything, can be learned from them.

I’m going to start with the good. It’s going to look like sunshine and rainbows… that’s the nature of covering “the good.”

  • Groupon – I dollar cost averaged at buying shares around $4 a share and sold them for around $8 a share. This is a rough estimate. I usually retain some shares in businesses that I believe in, but I just wanted to flip it and get out. I realized that I bought it for the wrong reasons. I bought it because I thought it was cheap and couldn’t get cheaper (downside protection is a common theme). It worked, but I wonder if it is more luck than skill.
  • Zenga – Much like Groupon, I bought it at a very cheap price… around $2.50 a share. I had confidence it wouldn’t go much lower because they had cash and real estate assets almost equal to $2.50 a share. It was like the company was valued at zero. It got up to around $4 and I sold. I didn’t believe in Zenga’s long-term business, so I got out.
  • Facebook – This was my biggest win. I bought shares that I dollar cost averaged at around $21.25. Unfortunately, I sold most of them at around $32. I still hold 25 fantastic shares, which at $94 is not half bad. Remember all that talk about the bungled IPO? Me neither. Remember the talk of ridiculous evaluations? Well at a P/E of 95 it isn’t cheap, but it isn’t crazy like Amazon either.
  • Google – I’m not sure this counts as part of my experiment because I bought so long ago. I bought at split adjusted $295 a share. At $665 today, it shows no signs of slowing down.
  • Apple – I loaded up at a split-adjusted $71 a share, but sold off a pile at $100 a share. It would have obviously been better to hold onto the shares, but I’ll look optimistically for a minute.
  • –

    • And now for the bad…

    • SodaStream – When it dropped from $50 to $37, I jumped in. Of course I’m smarter than the market and a small revenue miss wasn’t a big deal… especially in getting a 25% discount. Today it trades at $17. I had a few more trades in between where I made a few dollars buying low and selling a few dollars higher, but I took a sizable loss on most of the shares.
    • IBM – I bought it at around $170 and had a chance to sell at $200 a share while back. Now it is $160. I read it is Buffett’s biggest holding. I think he likes it for the same reason I do… a P/E of around 10. The revenues are shrinking every quarter, but they spend a lot of money buying back shares. They also pay dividends. IBM is in transition as it moves away from mainframes and chips and more towards cloud computing. It’s taking years and will probably take a few more, but I think it is going as well as could be expected.
    • Yahoo – I bought this because the money they were getting from the Alibaba shares essentially equaled the value of the company. I figure this gives me Yahoo’s business for free. I was up for a little while, but now I’d down about 7%. I think Marissa Mayer is very smart and I’m optimistic they’ll get things figured out.

    You’d think there would be a lot more bad in there. The “bad” is mostly in the form of lost opportunity. There are some investments that did nothing while the general market has gone up. My investment in Russia stocks is one example. My investment in Twitter is another example of money going nowhere.

    If I had to guess I’d say that it probably all comes out to market average. I did well with some and others I had essentially dead money. This reinforces what I thought all along… stock picking isn’t going to driver of wealth for me. I’m fine if I get market returns… or even slightly below market returns.

    Why would I be fine with below market returns? It’s a small amount of my portfolio. I’m learning a lot. I’m having fun. Losing or gaining a percent or two on a small amount of a portfolio isn’t going to add up to much over the long haul.

    All that said, here are the things I’ve learned about myself in investing:

    1. I Like Technology – I already knew that, but I had to point out the obvious here. Almost all of the companies mentioned are, at least in large part, software companies. (Apple is more software than most people think.)
    2. I Like Buying Cheap and getting Downside Protection – Even the big technology winners were bought fairly cheaply. It may be hard to remember it now but there were major questions about Facebook and Apple.
    3. I Let Loose the Small, Fad Companies – I viewed Zenga and Groupon as fads and I’m probably more lucky than good in making money with them.
    4. Don’t Necessary Buy What You Love – I’m a huge fan of SodaStream’s products, but that doesn’t necessarily lead to profits. I thought that their focus on healthy fizzy water and cost savings would be a winner with consumers, but I guess I was wrong. I can’t see why it isn’t in most households. I’m probably naive, but I keep holding on to a few shares hoping the general public sees what I see.

      It’s probably a very bad omen, but I did the same with shares of Palm. (Yes, I laugh at Samsung commercials showing off wireless charging, when I enjoyed a superior version of it back in 2009.)

    I think the #2 and #4 points are probably the best ones to take to heart. Even my loss in SodaStream could have been much, much worse if I didn’t buy on the dip.

    If I were to translate these insights into an investment today, I’d say that commodities look attractive. I’ve been saying that for some time only to see them lag the market or even lose money.

Ten Things I Thing I Think (and Personal Finance Links)

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Once again, a homage to NFL analyst Peter King…

  1. It may be difficult to believe, but I went to an MLM tasting party yesterday. As best I can tell, it is a legit MLM and it does not appear to be an illegal pyramid scheme (as opposed to One24). It was Wines for Humanity. The wines averaged around $20, which is pretty much the norm for any wine tasting. No one was recruited into becoming a distributor. In looking at the compensation plan today, I see that the distributor makes 17% of every sale, so that is the majority of payment. I think the FTC would be proud to call it a legit MLM.
  2. I really don’t like Facebook. I always considered their interface clunky and confusing. Also, I don’t like mix high school friends with college friends and all that stuff. I decided to give Google+ a few minutes this week and it is awesome. I particularly like how I can create various circles of friends and follow their streams or send messages to them. Some people may say, “Why do I need another social media platform with Twitter and Facebook?” I would respond that it’s time to ratchet down the Facebook and up the Google+ usage. I’m usually not a fan of pushing Google services since they already control enough of my data. However, they deserve credit in this case. They really seemed to innovate. If you have an invite look me up at Lazy Man and Money.
  3. I read this article about Facebook blocking users from exporting their data. That’s just another reason why I don’t want to support Facebook.
  4. I think some guy has his work cut out for him:

    I’m pretty sure that she’s faking being a cat hoarder (in fact more research confirms she is acting). It’s still fun.
  5. I think Barney Stinson invented the Hot-Crazy Scale specifically for cases like the cat lover above (again if it wasn’t fake):
  6. I think these Songify remixes are always funny.
  7. My wife and I picked up some bamboo sustainable sheets from Sears earlier this week. Egyptian cotton and thread counts just got buggywhipped. For around $45 we got sheets that are softer and more environmentally friendly than ones that cost $200.
  8. Last week you could find me at Moveable Feast. It’s a bunch of food trucks in one area. So you go get a couple of ribs from one place, some garlic noodles from another and, if you are like me, split a Cuban sandwich with your wife. You can top it off with a dessert from the dessert truck. It’s a little like a mall food court, but much more fun.
  9. I spent this morning trying to get Amazon’s Simple Email Service (SES) set up. Amazon needs to rethink the meaning of the word “Simple.” To get going, you need to verify your email address. This is usually done by having an email sent to you and clicking a link in your email inbox. To get the email sent to you with SES you have to install Amazon’s SES SDK, install 6 or 7 perl modules, and then install libcrypt-ssleay-perl and libnet-ssleay-perl (which seemed to be undocumented). Thanks to these SES Tips I was able to fix the last bug there. That’s Amazon’s definition of a Simple Email Service.
  10. I think the Red Sox are pretty fortunate to be in first place. I realize they are expected to be there with a 180 million dollar payroll. However, the Red Sox started the season with a rotation of Beckett, Lester, Buchholz, Matsuzaka, and Lackey. Lester, Buchholz, and Matsuzaka are currently on the disabled list. Beckett left the game early on Friday with an injury. For much of the season, Lackey has been the worst pitcher in baseball (highest ERA). After the All-star break most of the pitching should be coming back, but the injuries have made things interesting.

And now with the personal finance links:

Money Writers:

Top PF Posts:

How HP/Palm’s webOS Can Compete with Apple iOS and Google Android

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When I created this website more than 4 years ago, I said that I’d write about technology about 5% of the time. Well I lied. I almost never write about technology. Today I’m going to cash in some of those credits and write about technology. If this is the kind of thing that interests you, you are in luck with one of my longest articles. If not, kindly take a stroll through the archives.

Before I get started on topic in the title, let me preface it with a few disclaimers. I have a degree in Computer Science from a top 30 (according to U.S. News and World report) University – so in a lot of ways technology is “my thing.” Secondly, almost every piece of technology I’ve own has failed on me multiple times. I’m have about 5% success rate with faxes. Scanners work about 12% for me because some mysterious driver conflict in Windows causes it to fail (seriously, you’d think Windows 7 would just work with all printers/scanners/etc., but it doesn’t). Sometimes I wonder if certain technology should just disappear. After all, if you spent as much time fixing your car as you did driving it, you’d give up on it too. There are a few pieces of technology that have never failed me. One of them is Palm. I’ve been using their operating systems and devices since the days of Handspring over a decade ago. If this makes me a Palm “fanboy”, so be it. They’ve earned it.

A (Brief?) History of Three Smart Phones

With that out of the way, I’ve been a loyal Palm Pre user since it launched on June 6, 2009. That make my phone around 200 in smartphone years. When the phone came out the only thing that was close to it was the iPhone. The iPhone had a big head start, perhaps one of the most loyal customer-bases on the planet, a virtual monopoly in MP3 players and access to songs in their music store, plus a quality device. I’m sure I’m leaving out a lot here, but clearly the iPhone had a lot going for it. Palm was a small company and didn’t have a lot of money, so it partnered with one of the troubled carriers, Sprint, in hopes that they could boost each other. Palm made some poor marketing choices with some creepy commercials that inspired spoofs. Despite what many considered the great operating system, webOS, the physical hardware of the phone was criticized for its cheap plastic feel. Within a couple of months, the market had shifted. Verizon starting its “Droid Does” campaign. Though the Palm Pre would be on Verizon in a couple of months, Verizon had chosen to back Google’s Android platform. Palm ran into some financial difficulty and started to look for a buyer. During that time Sprint decided it should ride on Verizon’s coat tails and the growing Android momentum. It makes a lot of sense, there are a lot of companies making Android phones in a lot of form factors. You can have any Apple iOS phone or Palm webOS phone you want as long as it is what those companies give you. With Google Android you get choices from Motorola, HTC, Samsung, etc.

Apple’s iPhone and Google’s Android are the big players. Microsoft came out with a Windows phone late last year, but it hasn’t picked up traction. Some say RIM’s Blackberry franchise is where Palm was a couple of years when it had an aging operating system that needed a complete overhaul to compete with the new one of today (and RIM is working on that new OS). In the meantime, Hewlett-Packard, one of the world’s biggest computer companies bought Palm.

That’s pretty much led to the where we are today in the smart phone wars. A lot of people are claiming that it’s too late for Microsoft, RIM, and HP to compete. They say that software developers have already chosen sides. I’m not buying that. Apple was late to the game with the iPod and iPhone (there were already leading MP3 players and smartphones in the marketplace). Microsoft was late to the game with its Internet Explorer and Xbox – Netscape and Playstation were clear market leaders. Google was late to game with search – Yahoo, Lycos, and AltaVista had already concurred that market. If there’s one thing that we can learn from technology it’s that it changes constantly (that’s kind of inherit in the definition of technology). This especially true when big players have big money to spend as is the case with all the players in the smartphone market.

What HP/Palm Needs to Do to Compete

I’m going to pretend that I follow Microsoft’s or RIM’s strategy (other than RIM is stealing Palm’s user interface for it’s new tablet). I’m going to concentrate on what HP/Palm needs to do. From the very solid rumors out there, they are already doing at lot of it. We’ll find out for sure on February 9th when Palm holds an Apple-style unvieling of its products. In no particular order, here’s what I see:

Top of the Line Smartphone Hardware – I’ve never seen a bad review of webOS – in contrast every review is glowing. The hardware has receive the complaints. HP/Palm needs to commit to putting the latest processors, cameras, screens, etc. on their devices. People like what they can quantify and that means gigahertz, megapixels, and pixels. You can’t catch up unless you are at least on par with other leading phone’s specifications. In addition to this, they should continue to have a version with a keyboard and a slate-like version to compete directly with phones like the Evo and the iPhone. The more form factors they put out there the better. It’s working beautifully for Android.

A Top of the Line Tablet – Tablets are getting the buzz in the marketplace. Who knew? My old boss in 2004 was onto something when he started selling Windows tablets. Today, I see entire subways covered with iPad advertisements. Palm has hinted that there will be a tablet announced on Feb. 9th, but rumors are dictating there might be two – a 9-inch and a 7-incher.

What will those tablets need?

  • Screen Resolution – The tablets are expected to have the same resolution as iPad (1024×768 pixels). That would be a good start for Palm if they can get it out soon. Everyone knows that the iPad 2 is coming soon. Some say that will have better resolution, but most signs seem to show it will not. HP/Palm’s 7-inch tablet with a 1024×768 resolution is rumored to be coming in September. If the iPad 2 steps up the resolution, the 7-inch tablet would counter it well by upping the dots-per-inch over the 9-inch and being more portable.
  • Great Hardware – Like the smartphones, the tablets need dual cameras (video conferencing is a crucial selling point) as well as the latest and greatest chips. It has to look as sexy as the iPad too.
  • Easy Out-of-the-Box Tethering – If you have an iPhone you should be able to use it’s data connection via bluetooth for the iPad. It my understanding that this can’t be done (due to an agreement with AT&T) now, but will be coming to Verizon. If HP/Palm can make this happen, it would be a big leap as no one wants to pay for double for data (once for their tablet and once for their phone).
  • GPS – I would want to be able to use my 7-inch tablet for GPS navigation. These devices should be converging over the next couple of years. It would be easy to do that now. It should work for wi-fi only versions of the tablets (GPS in phones typically requires access to the network). Wi-Fi versions can come with enough memory set-aside for maps (just like any of the stand-alone GPS navigation systems you see today).
  • Other features – See below for more things that could be integrated into all their devices.

Data lives in the Cloud and Every HP/Palm Device is Connected to it – This is one area where HP/Palm can separate itself from the pack. HP bought cloud computing company 3Par for 2.3 billion dollars in a bidding war with Dell. If my phone, tablet, netbook stay in sync that would awesome. They can push the limits by using webOS’ biggest advantage, its focus on web technologies such as HTML and javascript, to create a browser-based version of WebOS. Just pop it out like a chat window and be able to drag web pages, music, video, etc. to the cloud… then access it instantly on your tablet/phone. This would be the kind of “Wow feature that people would love.” It is very likely this is where webOS is going… one of the strong rumors is that it comes with “tens of gigabytes” of cloud storage. Not everything can live in the cloud though, users may want read books in the park where wi-fi isn’t available (and with a tablet that doesn’t have a 3G contract).

“Bump” Information to Other Devices – It is rumored that you’ll be able to transfer files by just bumping two devices together. Bump your cell phone to your tablet and you are just where you left off. I wouldn’t have mentioned this feature, except that one of the credible rumors says this is a likely feature. Sounds pretty cool to me.

A Netbook – HP/Palm can go a couple of different ways with this one. They could sell a stand-alone netbook running on webOS. If they implement ideas here that could be quite successful. However, they could pull a Motorola Atrix. The Atrix is getting a lot of attention following it’s unveiling at the CES earlier this month. Essentially it is a phone that acts as the brains to a notebook. It can be docked into the notebook providing the user with a full-size keyboard and a full-size screen. This is the vision that Palm had years ago with its Foleo product. Looks like the technology with phone processors has caught up enough to make it a reality. If they go this way, the phone should dock into a television like the Atrix too.

Take Advantage of Exhibition Mode – When you have a webOS docked, it enters what is called “Exhibition mode.” In that mode it is very much just a display of information while it charges. Typically you get a clock and a calendar… and the phone knows to go into speaker-phone mode on incoming calls. For a tablet it would make sense to double as a digital photo frame. Because Exhibition modes can be customized, I can imagine an application that delivers a rich widget-based experience on a tablet. For example, it could fit a clock, calendar, weather, stock ticker, news feed, etc.

Inductive Charging – One of the unsung features of the Palm Pre was inductive charging. You just set it on the Palm Touchstone and its charging. There’s no cords to mess with. Magnets in the Touchstone keep the phone orientated and angled towards the user, so at the office you have a second screen in Exhibition mode.

Focus on Driving Experience – I would love to have a 7-inch GPS.

Premium Audio – The rumors say the tablet will come with premium audio. HP has a partnership with Beats by Dr. Dre. From what I’ve heard these headphones and speakers are Bose-quality. That’s a nice advantage over the iOS and Android tablets.

Partner with Amazon – The former CEO of Palm John Rubinstein joined Amazon’s Board of Directors late last year. Perhaps HP/Palm could leverage Amazon’s deals with music to create an iTunes competitor as well as have webOS power a color Kindle (like Android powers the Color Nook for Barnes and Noble).

Subsidize Applications, Especially Quality Ones – Apple iOS and Google Android have a hundreds of thousands of applications. While HP/Palm doesn’t need a bunch of flatulence applications, it does need to have a lot of them – people like what they can quantify. However, they also need to have the quality ones. They need to partner with banks to get the “take a picture” check deposit. They should get a Netflix Instant Play app on there. Hulu should be subsidized join the party. There should be apps for watching all the major sports in real-time (as long as users pay for the subscription service).

Compete on Price – I’m sure that HP/Palm doesn’t want to hear this, but they need to be a loss leader for a while. They need to get devices into the hands of people and win back all the fans they had from the Palm V days.

Pull in the Partnerships – HP has many business distribution channels. It’s time for HP to start pushing this out to the enterprise customers.

Ship it Soon – Every day that the goes by without a device being available to people is a day that webOS loses mind-share. HP/Palm needs to get things in people’s hands quickly.

Can HP Pull it Off?

They can if they want to. They have to be hungry and willing to go “all-in” with it as they said they’d do in the past. They have the money to hire developers and can take the hit to compete on price. The technology exists to do much of what I’ve outlined here… and they’ve certainly had the time to build a lot of them.

Will they pull it off? I can hope so. The market could use more competition. I’m trying not to get my hopes up. It would be nice to have a webOS printer/scanner/fax so that it will actually work as it is supposed to.

Why the Google Admob Acquisition is Important to Me

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Earlier this week Google made a $750 Million purchase of Admob a company specializing in mobile advertising. It surprised the market in two ways. It was Google’s 3rd largest acquisition (behind DoubleClick and YouTube) ever. The mobile advertising industry is fairly small at this time. However, Google is moving into mobile in a variety of ways. It has a mobile operating system (Google Android), mapping/GPS applications (Google Maps/ Latitude), phone applications (Google Voice), and I’m sure a few thing that I’ve missed.

So what does this have to do with me? I have worked for two mobile phone start-up companies in the past. When it was time to move on from them, I had to decide whether to buy my stock options or surrender them. This is often a difficult decision with a start-up company. If the company goes out of business, you get nothing. If it becomes successful, you can make a great deal on your investment. Complicating matters, it’s very difficult to sell private stock. There are a lot of rules like having to offer it back to the company before you can sell it to others. After much thought on my first company, I made a very risky investment and put around $2000 into buying the stock of the company. Roughly one year later, I found myself in similar position when I left my next mobile phone company. I made the same decision and plunged around $5000 into that stock. That’s a good deal of cash out there.

Fortunately the Google purchase puts me in good position. Google put out Google Facts about Google’s acquisition of AdMob and their chart shows that they now have mobile ads covered in: search ads, web display ads, and application display ads. Google points out a glaring omission, they have no SMS advertising. As fortune would have it, the company that I bought $5000 of private stock is probably the unquestioned leader in SMS advertising. Like Admob, the company is a Silicon Valley company like Google and would easily fill the SMS advertising gap. Probably the only thing holding back Google from buying them at this point is that regulators may hassle them if they went too crazy on the mobile advertising front at one time.

The other company that I worked for does location-based software. If you wanted to know where your friends are or where the nearest Starbucks is, you’d use this software. I worked for this company when I was in Boston. Google doesn’t need this company as much as it’s own Google Maps and Google Latitude does something similar. Also, Boston is not very close to Google’s Mountain View headquarters. If Google was to buy something in that area, they’d probably go with Loopt, a Silicon Valley company that does a similar thing. The only thing that really helps my old Boston-based company is that it is starting to move into location-based advertising. The holy grail of this type of advertising is this: You go to Starbucks’ website and sign up your phone to receive special offers. When you walk by a Starbucks, they might send you an SMS notification that you are eligible for a discount on coffee for the next half hour. If you were on the fence, would a savings of a dollar get you to go in and make a purchase? If it does, it’s a big win for Starbucks’ business. That kind of experience is the thing that a lot of businesses would pay for. And you better believe that Google would love to add that location-based component as a great complement to all it’s mobile advertising models.

I had almost forgotten that I own stock in these companies because it seemed like there would never be an event to make my stock liquid. They’ve gotten a lot more interesting lately though.

I Share My Asset Allocation (as do 7 other Money Writers)

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The Money Writers is having a group writing project. Each of us have decided to share our asset allocation and performance from the first of the year to last Friday. You might want to put the children to sleep, this could get ugly.

Asset Allocation

I would like to say that I put together a great graph for you, but I didn’t. My only excuse is what you already know… I’m Lazy. Instead I’ve put together my portfolio holdings inside my retirement accounts. You may ask why I don’t have significant money invested outside of retirement accounts. Good question and I’m not sure I have the best answer. I believe in having a healthy emergency fund as well as maxing out my retirement accounts (401Ks and Roth IRAs). I’ve also bought some significant private stock in companies I used to work at. I can’t sell these shares and I can’t communicate them to you (they’d give away my anonymity to a number of people).

Below is my asset allocation. You’ll notice that one Roth 401k doesn’t make the tickers very readily available. I know I could look them up if I went to click through some PDFs, but it’s not really important to me. My goal with each account is to be fairly diversified. I know it’s not perfect diversification, but I plan to roll them over into a Zecco IRA when the economy rebounds. There I can invest in low cost ETF (as you’ll see in my Roth IRA where I have more trading ability). I don’t want to move it while the prices are low in the off chance that we get a recovery while I’m out of the market shifting the money.

lazy-man-portfolio.jpg

I don’t know if anything in particular sticks out with this asset allocation. I suppose the shares of Google stand out, since it’s the only single company that I specifically went out of my way to own. I like to think of it as a hedge. Many websites, including this one, rely to some degree on Google sending traffic which leads directly to advertising dollars. If Google continues to monopolize Internet search, I want to stand to gain in the off-chance that they update their algorithm to hurt my sites. That said, you can tell I still don’t have a lot of money in Google.

The other thing that I find interesting is that I have just 20% of my money in international stocks. This is the first time that I’ve looked at it in totality and I’m disappointed in that allocation. I want to have much more money overseas. I don’t mean that to be anti-American.  I think it’s simply arrogant to keep 80% of my money in one country. It’s not just any one country, but the one country that I depend on for my income. It feels like working at a company and investing in the company stock… one bad turn of events and you could be wiped out.

You are probably wondering two things at this point. The first: What’s the return on portfolio like this? I’m 7.22% in the hole YTD. I would like to say that I found a way to stay positive, but the market has just not been good. Long term, I still think diversified equities is a solid investment.

The other question you might be wondering at this point: How are the other Money Writers doing this year? I’m afraid to look, I’m sure they are doing better than me. Just so you have good laugh at my misery check out their asset allocations: