DTSL — Delivery Technology Solutions, Inc.
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Research Report
DTSL — Delivery Technology Solutions, Inc.
July 26, 2010
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Traded: Pink Sheets Limited Price: $0.0052 bid (July 26, 2010)
Symbol: DTSL
Estimated market capitalization: $9,785,000 Outstanding shares: 1,030,000,000
(1,500,000,000 common authorized)
Company website:http://www.universaldelivery.com
52 week low: $0.0006– high $4.12
Recommendation________________________________________________________
We are recommending DTSL as a buy for speculative accounts of sophisticated investors who can understand and appreciate the risks and the potential rewards of this company.
Company Description____________________________________________________
DTSL has a complete delivery management solution for select businesses. DTSL focuses on chain operations that can benefit from One-Number Ordering customer delivery services, but who are unable to find a qualified partner. Here is a banner advertisement for this service:
When you want to buy using the DTSL service, you click the banner or call the toll free number 888-SUB-TO-GO. If you click the banner you are taken to http://www.888subtogo.com/ where you can easily order from the full menu.
DTSL has developed a complete software solution that enables client companies to expand nationally and internationally. DTSL’s complete management solution offers call center services, online ordering and curbside pickup expertise. This solution brands each company with its own nationwide toll-free number, online ordering with concentrated marketing and consulting services. Five key components are Software, Contact Center, Marketing, Consulting and Customer Service.
DTSL believes that it is the only qualified partner to have mastered the five essentials of the customer delivery solution: (1) One number or online ordering, (2) Call center excellence, (3) Point of sale integration, (4) Site delivery coordination, and (5) Marketing and training systems.
DTSL’s solution is for chain businesses that are ready to expand their marketplace, win additional market-share and build their bottom line.
These systems are designed to please the owner of the franchise, the manager of the franchise, the employees and, naturally, the customers.
After providing expert market analysis and management tools, DTSL creates and supports a one number ordering solution or online ordering solution.
DTSL has advanced Call Center telecommunications equipment and developed technology, training and management controls to assure that every delivery is handled with professional skills and systems. All of this is integrated with the point of sale. Orders ares tracked and integrated with store delivery staff availability.
All of this is supported with proven marketing systems and training systems that demand and promote Five-Star execution by employees.
DTSL’s Delivery Solutions benefit client companies by expanding their customer vase, increasing sales revenues, raising the amount of the average purchase, and thus, improving profits.
Summary Analysis_______________________________________________________
The economics of the software business model are well known. Developing superior software takes time and money. This means corporate sacrifice. However, once the software is developed, each additional copy of the software can be manufactured at a minimal cost and this cranks out huge torrents of cash flow.
Companies that can make the sacrifice to get themselves in a commanding lead in the software business tend to become juggernauts as they have the cash flow to generate more and more new software products, pushing them further and further ahead in their applications and industries. Moreover, once a system is built for one industry or one use, it is less expensive to adapt it to other industries and other uses.
Moreover, new companies entering the market with new products have to prove themselves. Software involves considerable de-bugging to be reliable and years of use to develop strong systems that cover all the characteristics needed for superior customer satisfaction. Thus, a company that has a software-type business model, that has proven itself with national clients, and is about to then expand with other clients and new industries, is usually poised for enormous expansion. The first mover advantage drives it on.
We feel that DTSL is proceeding much in this manner. The company spent millions and years to develop a new customer delivery solution. The solution has been through its trial stage. The solution has been adopted by a leading national company, first with a regional trial, and recently with a national roll out. The national roll out indicates that the software is ready for more national markets.
Further applications, further national customers, and entry into further industries can now be accomplished with less time and expense. This means the prospect of rapidly growing sales and relatively large profit margins for DTSL.
Thus, it is easy to imagine that as DTSL expands its revenues and cash flows, the company has the opportunity to become one of the leading, if not the leading, customer delivery company in the country.
Overview_______________________________________________________________
Following six years of research and development, DTSL achieved exclusive capabilities to provide toll-free telephone and Internet ordering for companies that want to make delivery service part of their business, but do not know how. Naturally, many people use home and office delivery service in cities across America every day. However, until DTSL developed it solution, there was no single-source provider that made it possible to manage an unlimited number of deliveries and locations anywhere in the U.S.
DTSL uses a single toll-free phone number and website address. DTSL receives phone orders and online orders at a single order processing office. The order is quickly processed and charged to the customer’s credit card. Just moments later, through an exclusive technology connection to the individual store or restaurant, DTSL sends orders and delivery instruction messages through the cash register terminal. The store or restaurant then prepares and makes the delivery, as instructed.
The DTSL order processing center monitors the order’s progress to help speed the delivery to the customer, and ensure that it is correct. In fact, the order is tracked continuously and until the delivery is completed. Customer satisfaction surveys are conducted to ensure the best quality service.
888-SUB-TO-GO: The primary example of how DTSL serves a large chain is its 888-SUB-TO-GO service for SUBWAY(R) Restaurants, the largest franchise brand with more than 23,000 locations in the U.S. When a customer calls the toll-free number, or visits www.888subtogo.com, they can place an order for a home or office lunch of sandwiches, salads, sides and beverages. Customers pay DTSL a processing fee starting at $2.50, and going higher depending on order size.
There is also catering delivery service. Calling or clicking in advance, individuals or companies can place large orders of sandwich platters and giant 6-foot subs with all the sides for dozens, or hundreds, of people. 888-SUB-TO-GO has even served thousands of lunches in dozens of cities, all at once.
DTSL achieves 99% customer satisfaction in its surveys. Combining innovative technology with an old-fashioned dedication to service is how DTSL is changing the way companies and customers connect through delivery technology.
Industry Overview_______________________________________________________
As anyone who has traveled can attest, the United States has become a nation of chain businesses. The world seems to be following this trend. Subway has 33,000 outlets in 92 countries. McDonalds, Dunkin Donuts, Wal-Mart, Office Depot, and hundreds of other brand name chains in every possible type of industry populate every city and town where sufficient market can be found.
These chains generally compete with blood-thirsty enthusiasm with similar chains. As the food or other products they offer are generally very much alike, they compete in other ways such as price and convenience. As we all know, offering delivery pizza has been a very successful business model, as Domino’s end run around Pizza Hut proved. Thus, having a convenient system like DTSL’s is very important to these chains.
Not only must the delivery system be convenient, it must be consistent. One bad customer experience can drive a consumer away forever. This is another difference that DTSL can bring to the table. With their well-developed systems and training, their customers can rest assured that their customers will stay happy and loyal.
DTSL also is ready to follow these chains into related applications like catering and into their client’s foreign markets.
Highlights______________________________________________________________
DTSL recently executed a National Vendor Agreement with Doctor’s Associates, Inc. (DAI) the franchisor of SUBWAY Restaurants, making 888-SUB-TO-GO Catering & Delivery services an option nationally.
The SUBWAY(R) restaurant chain is the world’s largest submarine sandwich franchise, with nearly 33,000 locations in 92 countries.
DTSL can now search for national catering opportunities from large corporations and organizations for consideration by DAI.
This agreement shows the strength of DTSL’s proprietary technology solutions in high volume order processing.
DTSL can also offer its corporate catering technology on a private brand basis to all corporate clients, including large organizations and institutions. DTSL’s customers can not easily order and manage catering events at multiple venues serving thousands of meals, and prepare reports detailing every event, from their desktop or laptop.
DTSL expects up to 1,500 participating restaurants by the end of 2010.
Further expanding its consumer convenience, DTSL just announced a strategic alliance with GoIP Global, Inc. DTSL will use GOIG’s GO800 Voice Keywords to connect consumers by Text to their call center. Consumers will be able to text such voice keywords as Pizza, Sushi, Subs, etc., place an order and have their order delivered by a local store. As part of the strategic alliance GOIG will acquire 200 million shares of DTSL common shares.
GoIP Global offers a range of services, solutions and tools for brands, agencies, content providers, online portals, entertainment and media companies. GoIP Global offers brand and content customers great flexibility in creating mobile marketing campaigns and applications. Through its subsidiary GO800, LLC, GO800(TM), a new patent-pending text messaging service which launched in 2010, enables advertisers to incorporate a text prompt in their advertisements, prompting consumers to contact them through a text message rather than calling a 1-800 toll free number.
DTSL also has made a strategic partnership with American Express (NYSE:AXP) in a co-promotional marketing initiative for the 888-SUB-TO-GO program in the Washington D.C. market. This partnership with a major financial brand speaks well of DTSL’s performance and potential.
DTSL will be focusing on several key industries using a new in-house sales and account management staff. These include major pharmaceutical companies, national realtors, consumer electronics manufacturers and technology companies. These companies are well-known for their lunchtime buying to reward and influence their customers. Additionally, training sessions at corporate offices, and off-site hotel venues often required “ordering in” for breakfasts and lunches.
DTSL has helped several national corporations over the past year manage large scale catering events at multiple locations across the country.
DTSL will target more than 65,000 corporate event planners in the U.S., as well as marketing directors and sales managers who are usually picking up the tab. Efficiencies and economies produced by DTSL’s new technology will also serve non-corporate clients, such as planners servicing religious organizations and many public and private associations who sponsor tens of thousands of events each year in multiple locations.
DTSL has already assisted in catering events for corporations, such as HP, Verizon, T-Mobile and Wells Fargo, encompassing multiple cities and time-zones for a simultaneous, coordinated, delivery of thousands of individual lunch boxes. DTSL sees tremendous potential in the corporate catering market segment.
We believe that with a proven system, accepted by national companies, DTSL is poised for significant expansion.
Financial Overview______________________________________________________
DTSL closed at $0.0095 bid in the Pink Sheets market, with a market capitalization of $9,785,000. While 1,030,000,000 shares are outstanding, the float is only 152,000,000 as of July 16, 2010. The company has a relatively large number of shareholders of record, 1,359 as of April 19, 2010.
The company has ravaged its balance sheet doing research and development, and shows minimal revenues during its trial roll out, but we feel with the recent developments, it should be prepared to make major advances in revenues and as these revenues have relatively minimal costs of goods sold, much of this should fall to the bottom line.
Excitement over the company’s prospects drove the stock much higher in late 2009. The stock is now at a bargain price compared to these highs.
Other positive signs include the recent cash investment of GoIP Global, Inc.
We are recommending DTSL as a buy for speculative accounts of sophisticated investors who can understand and appreciate the risks and the potential rewards of this company.
Disclaimers_____________________________________________________________
This is a very speculative stock traded at www.pinksheets.com.
John Lux of Investing-performance.com may receive compensation for financial consulting work for the company. Such compensation may be paid in cash or stock. John Lux has not received any compensation to date. John Lux does not hold any position in the issuer being covered at the present time unless mentioned above. John Lux and or www.investing-performance.com may receive payments from the issuer’s corporate advisor for financial advice or investment banking services rendered. John Lux’s and www.investing-performance.com’s mandate here is simply to provide accurate, unbiased coverage of the issuer to its shareholders and followers.
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Disclaimer: Never invest in any stock featured on our site, emails or press releases unless you can afford to lose your entire investment. This disclaimer is to be read and fully understood before using our site. PLEASE NOTE: The investing-performance.com employees are NOT Registered as Investment Advisors in any jurisdiction whatsoever.
The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. The owner, publisher, editor and their associates are not responsible for errors and omissions. They may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. Any opinions expressed are subject to change without notice. investing-performance.com encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and investing-performance.com makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies or the information contained herein. investing-performance.com and its affiliates are not registered investment advisors or broker dealers. investing-performance.com has been advised that the investments in companies profiled are considered to be high risk and use of the information provided is at the investor’s sole risk. investing-performance.com also advises that the purchase of such high risk securities may result in the loss of some or all of the investment. Investors should not rely solely on the information presented. Rather, investors should use the information provided by the profiled companies as a starting point for doing additional independent research on the profiled companies in order to allow the investor to form his or her own opinion regarding investing in the profiled companies. Factual statements made by the profiled companies are made as of the date stated and are subject to change without notice.
Investing in micro-cap securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s entire investment may be lost or impaired due to the speculative nature of the companies profiled. investing-performance.com makes no recommendation that the securities of the companies profiled should be purchased, sold or held by individuals or entities that learn of the profiled companies through investing-performance.com. Investing-performance.com owners may or may not hold positions in the companies that are profiled. The information contained herein contains forward-looking information within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934 including statements regarding expected continual growth of the company and the value of its securities. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 it is hereby noted that statements contained
herein that look forward in time which include everything other than historical information, involve risk and uncertainties that may affect the company’s actual results of operation. Factors that could cause actual results to differ include the size and growth of the market for the company’s products, the company’s ability to fund its capital requirements in the near term and in the long term, pricing pressures, unforeseen and/or unexpected circumstances in happenings, pricing pressures, etc. Investing in securities is speculative and carries risk. Past performance does not guarantee future results.
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Buy Recommendation — Eline Entertainment Group, Inc. (EEGI)
www.Investing-Performance.com Research Report Eline Entertainment, Inc. April 30, 2010 ______ Traded: Pink Sheets Limited Price: $0.01 bid (April 30, 2010) Symbol: EEGI Estimated market capitalization: $9,456,000 Outstanding shares: 788,000,000 (888 million common authorized) Company website: http://www.elineentertainment.com Float: 80,588,331 as of Dec 31, 2009 52 week low: $0.0005– high $0.10 Recommendation We recommend buying EEGI for suitable speculative accounts because we believe that the company's market value, $9.5 million, is extremely low in relation to its $2 million in earnings for 2009, predicted earnings for 2010 of $4.2 million and the company's outstanding potential for growth. If management's predictions are met, the stock is selling at only 2.26 times 2010 net. The Company Eline Entertainment Group's subsidiary is China-based Innovation Investment Group. Innovation Investment Group takes an innovative approach to education and focuses on training leadership skills, preparing students for higher education on the international level. The company is striving to become the educational brand of choice in China. Innovation Investment Group presently operates ten Innovation Training Centers in North East China. Innovation Investment plans to increase to 30 centers this year, and to 100 centers by 2012. After that, the company plans to enter international education market. Each Innovation Training Center accommodates 150 students. Centers are run on the boarding system basis. Annual fees per student are between $15,000~22,000. The reason that Innovation can demand these fees is because they train “supernormal” children to be leaders in business. Their children are motivated to learn actively. The company is expanding rapidly because the number of wealthy Chinese is constantly increasing. In China, there are presently over 825,000 individuals with wealth of over 10 million RMB or about $1.5 million US. Further, Chinese culture promotes the company's growth. According to Chinese tradition, spending on education resources is one of the family’s major expenditures. With a gross domestic product of over $1.41 trillion and an annual rate of real GDP growth at 9.1%, the average PRC family sets aside a whopping 10% of its savings for education according to the United Nations Educational, Scientific, and Cultural Organization. Many Chinese parents are willing to invest in their children for better and higher education because it is critical for their future opportunities and advancement. The Chinese take education very seriously. Ten million Chinese students take the university entry examination annually, five million more than in 2002. Wealthy families will pay as much as $14,000 to reward their students if they do well on this exam. Given Innovation Investment's rapid and lucrative penetration of this pro-education market, we expect their growth to continue. The company's profit margins are exceptional. The company profits from offering the intangible benefit of a superior education to its students. In 2009, the company had net profits of $2 million on $2.7 million in sales. These kinds of margins give the muscle to expand. Total assets were only $3.7 million, showing the company's ability to earn a return on its intangibles. Whatever Innovation Investment's program is, wealthy Chinese are willing to pay a premium for it. We believe that the value of intangibles has to show up in the bottom line to be truly of value, and here it has. This intangible value is clearly the reflection of the spirit of the company's guiding light, Wei Hong, one of the country's leading motivational speakers, reportedly a household name in self-improvement, inspiration and motivation across China. Ms. Hong motivates crowds, inspires audiences of men and women, and teaches public the road to personal success. She speaks from personal experience, promotes high-energy approach to life, and challenges people to 'step up, work hard, challenge their limits, become who they always want to become and get what they deserve'. Her teaching is based on forcing people to reevaluate their perspectives and personal abilities, teaching essential leadership skills, helping people master assertiveness and nurturing open, constructive communication in life and in the workplace. While any such analysis is speculative, if the company were to achieve 30 centers in 2010, based on their performance in 2009, we might find that net profit would be as high as $4 million. In fact, management predicts $4.2 million in profits on $5.8 million in revenues. On 100 centers in 2012, assuming the results tracked those of the existing centers, net profit might reach something over $10 million. These numbers are pure speculation, but when we add in the fact that the current market value of the company is about $10 million, we can start to imagine the upside potential. Risks in such growth companies typically include over-expansion leading to loss of control over costs, extrinsic events, such as a decline in the Chinese economy, and many other risks. Investors are invited to study the company's information postings on pinksheets.com for more risks and further information. The company finds itself in the Pink Sheets because SEC-qualified audits for Chinese companies are hard to come by. Technical Analysis Like most Pink Sheet stocks, EEGI is very volatile. The recent trend has been a sluggish decline to current levels. We are unable to say if this will continue, but in our opinion, it offers the opportunity to slowly accumulate a position. Summary EEGI is recommended for speculative accounts that can handle a high degree of risk. We believe that the stock is cheap for a company that intends to grow exponentially with a P/E of 5 based on 2009 earnings and 2.26 times expected 2010 net. Disclosure The writer of this report, John E. Lux has a long interest in EEGI. He may sell such position at any time without notice. ]Disclaimers This is a very speculative stock traded at www.pinksheets.com. John Lux of Investing-performance.com has received compensation for financial consulting work for the company and expects to receive such compensation in the future. Such compensation may be paid in cash or stock. John Lux has not received any stock compensation to date. John Lux does not hold any position in the issuer being covered at the present time unless mentioned above. John Lux and or www.investing-performance.com may receive payments from the issuer’s corporate advisor for financial advice or investment banking services rendered. John Lux’s and www.investing-performance.com’s mandate here is simply to provide accurate, unbiased coverage of the issuer to its shareholders and followers. About www.investing-performance.com Disclaimer: Never invest in any stock featured on our site, emails or press releases unless you can afford to lose your entire investment. This disclaimer is to be read and fully understood before using our site. PLEASE NOTE: The investing-performance.com ]employees are NOT Registered as Investment Advisors in any jurisdiction whatsoever. \ The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. The owner, publisher, editor and their associates are not responsible for errors and omissions. They may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. Any opinions expressed are subject to change without notice. investing-performance.com encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and investing-performance.com makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies or the information contained herein. investing-performance.com and its affiliates are not registered investment advisors or broker dealers. investing-performance.com has been advised that the investments in companies profiled are considered to be high risk and use of the information provided is at the investor's sole risk. investing-performance.com also advises that the purchase of such high risk securities may result in the loss of some or all of the investment. Investors should not rely solely on the information presented. Rather, investors should use the information provided by the profiled companies as a starting point for doing additional independent research on the profiled companies in order to allow the investor to form his or her own opinion regarding investing in the profiled companies. Factual statements made by the profiled companies are made as of the date stated and are subject to change without notice. Investing in micro-cap securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor's entire investment may be lost or impaired due to the speculative nature of the companies profiled. investing-performance.com makes no recommendation that the securities of the companies profiled should be purchased, sold or held by individuals or entities that learn of the profiled companies through investing-performance.com. Investing-performance.com o wners may or may not hold positions in the companies that are profiled. The information contained herein contains forward-looking information within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934 including statements regarding expected continual growth of the company and the value of its securities. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 it is hereby noted that statements contained herein that look forward in time which include everything other than historical information, involve risk and uncertainties that may affect the company's actual results of operation. Factors that could cause actual results to differ include the size and growth of the market for the company's products, the company's ability to fund its capital requirements in the near term and in the long term, pricing pressures, unforeseen and/or unexpected circumstances in happenings, pricing pressures, etc. Investing in securities is speculative and carries risk. Past performance does not guarantee future results. Third Party Web Sites and Information: investing-performance.com may provide hyperlinks to third party websites or access to third party content. investing-performance.com does not control, endorse, or guarantee content found in such sites. You agree that investing-performance.com is not responsible for any content, associated links, resources, or services associated with a third party site. You further agree that investing-performance.com shall not be liable for any loss or damage of any sort associated with your use of third party content. Links and access to these sites are provided for your convenience only. For further information, please contact: investing-performance.com.
Making And Spending
I lived well and spent a lot. When I had a good day, I splurged at the Oyster Bar. I had a girl friend in Washington, a Presidential speech writer, and I went to spend the weekend with her every two weeks. I donated large amounts to my church. I had the burden of paying 50% of my income in federal, New York City and State taxes. I belonged to an expensive club. If I wanted something, I bought it.
For those reasons, at the end of the month, I was usually broke. I had to make money every month without fail or write a check to the firm for money I definitely did not have and wanted to spend elsewhere.
I had to find a way (1) to not lose any money, and (2) to make big bucks fast!
Isn’t that every investor’s dream? Isn’t that what you really want to know?
Well, I was forced by economic duress to find out how to live it or else give up my lifestyle.
Fortunately, I loved to read, especially about investing. Especially annual reports. I had a mind that remembered stock charts easily. I had a lawyer’s mind that grabbed on to large amounts of data and found patterns. I had a flair for statistics and a degree in statistical analysis. As a matter of fact, at New York University, my professors soon learned not to cross me or ask is anyone had a better solution to a problem. Because I had dropped out of English, when I returned to study Business Statistics – now called Quantitative Analysis – (that’s right I was one of the original “Quants” on Wall Street) I was placed on academic probation to start. Finding that the statistics courses other struggled with were intuitively obvious to me, I made the Dean’s List every semester without really studying, even though some professors graded me down for picking fights with them.
So when I went back to Wall Street, I had all the tools and all the incentive and time to crack the code. It took years of 100 hour weeks, lots of losses as I tried those things that were touted as the work of the genius gurus, only to find that many of these things were not true. When you put money on a method, you know at the end of the trade whether it worked or not. The market is a very unforgiving instructor. It punishes you for being wrong without the slightest mercy. And in the stock market, there are a lot of ways to be wrong.
The market also punishes you fast. My boss would help at the end of every month if I had a net loss. So every month I had the discipline of being right or being hungry. The stock market legends, as wonderful and as brilliant as they are, only had to answer for every quarter or every year. Also, their salaries were not directly based on performance. They got paid a salary and an annual bonus. I got paid with a check every month, 50% of all gains (repay 50% of all losses) and I got charged for every trade a ticket charge of $30. Are you starting to see why I had the great incentive to develop a way to not lose money yet make huge, fast profits? If I hit a home run, I got half the goodies. Most hedge fund managers get 20% and they have to share that with their staff. I put that 50% all in my pocket. Is it any wonder that my results were to make larger percentage gains than the gurus?
What about you, do you want not to lose money? Do you want to know the basics of finding stock that move far and fast? Well, you may be surprised to find that there is such knowledge and you can have it here if you really want it.
An article on John Lux that was written in 1982, when he was running the trading department of an investment banking firm on Wall Street. At this time he was about to embark on years of phenomenal profits.
John Lux
“Theory without nerve doesn’t lead to action — and in the stock market, it’s action that makes you money.”
There are nearly 47,000 registered stockbrokers in the United States, 10,000 of whom are in New York. That’s a large crowd to stand out in, especially when you realize that the way a stockbroker stands out is by quietly and unobtrusively picking winners.
But some do. John Lux, for one, not just because he is tall — which he is — or because his prematurely white hair is striking — which it is (could it be that John Lux is the “Silver Fox ” of the ’80s?). No, John is outstanding because he is exceptionally adept at picking winners.
“When I was running the trading department for another market-making firm it wasn’t uncommon for us to have one, two or three of the top ten stocks in percentage increase in one day. And we only traded fifty stocks, a very small fraction of the thousands of over-the-counter stocks, so for us to have one or more out of those ten is a pretty good trick.”
Indeed. No false modesty here. He simply knows what he is doing and is aware of his expertise. As a result of John’s knowledge and experience, he doesn’t hesitate to go into a market which looks difficult to buy into. That’s important. He says, “I know how to get in and accumulate position without ‘disturbing’ the market. I’ve quietly acquired nice chunks of stock, watching it go down every day. There was one situation. . . it looked like nobody in his right mind would buy. And no one did — except me. Dealers would call me and plead with me to take unwanted inventory off their hands. The stock was weak, weak. I took in stock from these guys ‘as a favor.’ A few weeks later they started to trying to buy it back, then at two three and four times higher. I generously let them have it back and got out of it.”
In that particular case. the stock ultimately went to twice the price that Lux got for it, but he wasn’t bothered by getting out too soon. He says with a smile, “I don’t mind getting out a little early. I’m satisfied with a four — times return over a three month period. Often I’m righter than I now and get out too early, but that’s OK. I set my objective and I’m prepared to get out after I reach that as soon as the stock starts looking weak at all.
“The time to sell is when things look so good, when everybody in the world is buying. After a certain point, there’s no one left to come in and push it to a higher price. It has to come down. You have to have something that makes you stand there firmly facing your chosen direction when everyone is racing by you the other way. You can’t follow the crowd. When the Wall Street Journal is giving it a big play, don’t be afraid to kiss it goodbye. By the time it gets in those pages, there’s nobody left to buy it.”
That confidence comes out of a wide well of knowledge. Lux’s background, an interesting mix of art, science and law, is not exactly what one would expect.
( He got his law degree after first studying Engineering and English.)
Born in Pittsburgh 35 years ago, Lux has lived in Chicago, Massachusetts, Maryland and Delaware. His father, currently Chairman of the Board of AMETEK, Inc., traveled a lot during John’s youth.
Growing up in a home where your father has a Ph.D. and your mother practices judo and plays drums in a jazz band is bound to have a comprehensive and lasting effect. Between John’s natural curiosity, his studious nature and the influences of his brilliant father and his imaginative and fun-loving mother, he developed a variegated approach to learning and living. His interest were broad:” I read everything I could get my hands on from scientific texts to musical biographies and magazines of all descriptions.”
His memory, particularly for numbers, is phenomenal. Describing his first job (at E.F. Hutton) he says, “After working my way up from clerk to getting quotes to assistant order clerk to order clerk (almost that fast), I’d follow 100 stocks and could tell you the price on them at any time. And I could tell you roughly what the prices were on another 200. We used to make about 100 trades a day and I could remember all the orders I’d made the previous month, who I talked to, what their prices were.”
But more important and valuable than his unique memory is John’s ability to devour mountains of data — descriptions, figures, facts, projections — and perceive their patterns and trends. In describing this ability, Lux uses the analogy: “When a safecracker hears the faint chain of clicks that means he’s arrived at the right number, he knows . . . that’s what it’s like when you pickup a piece of data, have an insight and all of a sudden, things start falling into line.”
Listening to him talk about his is much like listening to a painter or musician explain his art; but that’s not really surprising. After all, what is art but the combination of intuition, logic, imagination, and daring?
As a boy, Lux used to help his father plot commodities charts. In retrospect, John regards that experience as what set him on the road he is on now.
“He [Lux Senior] was behind and gave me about three months back prices to chart. After I’d worked for about a week, and had the chart started, I began guessing which way it was going to go. It turned out that I was very good at guessing that. I became fascinated an asked him for some books to read. He dumped about 20 pounds of books on me, including Granville’s and — after going through them as fast as I could — I decided I wanted to trade commodities.
“I was still underage, so he opened a small account for me at The F.I. duPont and gave his secretary power of attorney. I would sit where I could watch the board and then run out to a pay phone, and call the secretary and tell her, ‘Sell wheat short’; then run back into the office and stand behind the broker — who did not know who I was — and listen while he answered the phone to be sure he got it right. The first week I did this I made $100 on a $500 investment. I thought, ‘this sure beats working for a living.’
Then came the E.F. Hutton job where Lux developed his ‘feel’ for stocks. “They’re like individuals, they each have their own unique personality. some of them are fat and lazy, and some o them are thin and jump around. ” He left Hutton after having moved up to assistant trader.
Laird, Bissel and Meeds was next — as a trader. “But when I started actually trading stocks and doing deals, I realized that I didn’t have enough education. At that point I had a year of engineering and a year of English, but hadn’t studied any accounting, business or law. other than what I’d read, which , although substantial, was not enough.”
Why law; was that essential to a career in investments? “My legal background helps me counsel people who have problems as well as providing some good connections. Also, I know how to work with lawyers. More than that, it tends to get me into more sophisticated projects. I can read a tax shelter prospectus and understand what was on the mind of the person who drafted it. I can tell you what he’s not saying as well as what he is saying. Believe me, that’s a valuable skill.”
Leaning back in his chair, Lux recalls when he decided to become a lawyer: “I was negotiating a deal and a lawyer rewrote my one-page agreement into fourteen-page document. He killed the deal and won my admiration. I went back to the NYU School of Business and took all the basic courses I could get, winding with a major in statistics. Then came law school in Maryland. That was particularly beneficial because I already knew the applications I intended for it. I seem to have real flair for the law. During that period I clerked for a judge who had been on the bench for 13 years and that was a great experience.”
The big question – whatever the background, education, etc., of the broker — is : how do you pick a winner; a sleeper that is going to take off?”
Typically, Lux answered softly and with great confidence. “The picking of good stocks is simple. I could write up the bare rules without explanation on two pieces of paper. But there is something you must understand here. My decisions and choices are based on an enormous amount of research as well as what I feel is my rather unique viewpoint, the outgrowth of my experience as a trader. As you know, a trader’s interest is in making money every day in that stock. to do that, you must trade it many, many times and on a very thin margin; a quarter , an eighth, a sixteenth, a half point — if you can get it. You can’t afford to be very wrong. Otherwise your wife will get very, very angry with you. You have got to know every day where that stock is going. What’s going to be the absolute low; what’s going to be the absolute high; when is too cheap; when is it too high? You wrestle with every move in price the stock makes, large or small. As a broker you must play the big swings.
“As a trader, I was delighted if I could turn my inventory over three or even four times a day. for a broker to turn a client’s inventory four times in a year is outrageous! The point is that my trader viewpoint makes me very sharp on where the stock is all the time. It also means that I am ‘cheaper’ in terms of watching my client’s money than the average broker. I look for cheaper stocks than others are buying. I ‘ll go that extra mile to see if I can find it cheaper. Most other brokers buy retail. I want it wholesale.”
John Lux specializes in low-priced stocks; specifically low-priced technology growth stocks. They type of stocks he likes is “A good solid company that’s been around a long time where something has happened to the business and it’s going to be a very valuable business for a long time to come; or, where they’ve grown enough to be able to make an exponential move.
“What I’m looking for is a company just before it started to make the break. I’m looking of the stock that’s going to go $1 to $2 to $4 to $8 . . . . that means I’m looking for smaller companies. Small companies tend to be the reflection of one man’s shadow. You know. You get a person who’s very dynamic, who can overcome obstacles and really make things happen. This kind o leader can take the company and drive it and the stock into power. A small company with someone like that in charge — a man or woman who can really make it go right NO MATTER WHAT is a good stock to buy. You look at past performance, future intention and present-time ability.”
It almost sounds as if Lux is a CEO handicapper, but he’ll be very quick to tell you that’s not what he does. He puts it this way: “I do not bet on individuals. I bet that if you shoot fish in a barrel you might get some. I’m talking about a situation where, as an outsider, I could run the business and to a reasonably competent job. We’re talking about simple businesses. I don’t like situations where the company has to come up with new products every year; has to outdo the competition and spend its time and energy playing ‘dog eat dog.’ I think that’s a risk you don’t have to take. “
That’s very important to Lux — minimal risk and maximum potential must both be present. That doesn’t mean there are no opportunities just because the economic climate is stormy either. He says “small companies don’t have that much to do with the economy. A small company’s sales could go up 100% and the economy would never know it. I a starfish on the ocean bottom arches its back does he create a wave on the surface of the ocean? Or, to bring it closer to home; if your personal income doubles or even triples does that alter the economic picture of New York City?
Lux likes to use analogous images to make his point. But whether he is talking about undersea starfish, fish in barrels or another of his favorites: “going hunting where the ducks are,” you can be sure he’s still talking about low risk/high gain, which is the essence of his investment philosophy. As for hunting where the ducks are, he says: “There are industries that are really depressed, and others that will be. I don’t want to get involved with them. It may be that one out of a hundred companies in a depressed area is going to do great, but again; I don’t think that’s a risk to be taken.”
We talked at some length about his investment philosophy, but, although he was more than willing to discuss concepts and ideas, when it comes down to the nuts and bolts of exactly what he does, Lux — like the magician who only smiles and shakes his head when asked how to do the trick — is straightforward in his refusal to divulge his techniques.
“I don’t want to tell you everything I do, but I will say this: If you read all the classic books on stock market investing, you’d probably get 80% of what I do — if you could pick the right data out of it.
“My philosophy is based on being a trader and wondering what makes stocks go up or down making decisions about what to do today on every single stock, sometimes five times a day. That’s an awful lot of tests, and a lot of opportunities to learn.
“A few years ago when I returned to Wall Street, I look at everything to be sure I wasn’t missing anything. Now I’ve narrowed it down so I only have to look at a few thousand companies instead of ten thousand. The rules I’ve come up with to make that possible are very workable and simple. None of it is ’secret.’ It’s all in the business branch of the Brooklyn Pubic Library.”
Oversimplification? Probably not. Lux points out that the apparent complexity in the investment field is due to the vast amount of information, misinformation and advice — good and otherwise — that is constantly generated and disseminated. The result is confusion rather than clarity.
“I was very fortunate” he says. “One of the first books I read on the stock market was the old Wyckoff course. Wyckoff was an investment advisor in the thirties who was so successful that when he put out a recommendation, such a buying panic resulted that it destroyed the orderliness of the market. Like Granville (to a lesser extent) is today. Wyckoff published two special volumes in stock market investing: leather bound loose-leaf notebooks which were not for sale; they could only be leased. They were kept locked. In those two volumes he put the great secrets of investing in the market. That gave me my starting idea, an idea which I compared to everything else I read, saw and did. I grasped the overall principle of how stocks moved; then I began to relate other aspects to that.”
Once again, when the conversation led toward specifying these ’simple secret,’ Lux politely but firmly guided ups back onto more general ground. He didn’t refuse to discuss specifics, he merely got a bit vague about details. For instance: “I collect all the stocks with a limited downside risk; they’re already so cheap they’re not likely to get any cheaper. I’m looking fat the area where there are stocks that may have explosive growth — areas where other people can’t bother to look — at companies that don’t receive much attention or publicity, who either can’t afford or haven’t bothered about publicity. Then I look at the upside potential. Here’s the trick: most people are just evaluating the stocks and they see that the company’s going to grow. I care about the business and the earnings, certainly, but what I really care about is what’s going to happen to the price. I don’t care about the company’s size or visibility. I do care that it has a situation where it’s almost guaranteed explosive earnings growth; a company that has a situation where they’re the only ones doing what they do; or they’ve somehow got a lock on the market so that for four or five years (about as long as anyone can reasonably predict) they won’t be effectively hit, impacted or seriously threatened by competition; those companies that are in a little vacuum of time where they can go off like rocket.
“In those companies there are certain factors I look for which will cause that growth, fuel the liftoff so to speak. And I’m looking at the stock. I want to know; how many shares are outstanding; who holds them; what’s the volume; who’s the big buyer, the big seller? In other words, who’s playing the game If the stock rises, is there going to be more for sale and if so, how much, who will bid, what’s going to happen?
“What we’re talking about here is a stock that’s going to go from being a total wallflower to being the most popular girl at the dance — in rapid order. It’s a little like judging a beauty contest by selecting the girl you think other people will pick as the winner.”
To most laymen (and to many brokers) the stock market is a vast gambling game. How it operates is a mystery and the exchange itself more nearly resembles a casino that the hub of one of the businesses that is a major indicator of the economic health of this country. Small wonder, then, that a professional of the caliber of John Lux is so greatly valued by his clients and associates. Like all professionals, Lux never stops learning. “I can’t imaging when Iw would feel that I had all the answers. I never stop trying to find out ‘why.’ But I don’t get hung up on it. I’m just happy to know some things that work.”
Of course, there’s more going on in the investing field than speculation. Lux admits that “it isn’t always hunting session”
In the off season he like s tax shelters. “Real estate is a good steady shelter, although I think others, for example publishing, are more interesting, especially if you can locate a few people who do very good deals with good returns. The only trouble is, there aren’t enough good deals. I’d be satisfied to forget about explosive stocks and just do deals, but that isn’t possible yet.”
Would he really? I don’t think so. The excitement of the game is not something John Lux would really relinquish, even for any deal. Watching and listening to him as he talks about finding a company no none has ever heard of; getting caught up in his intensity as he relates his discoveries during research, his satisfaction evident as he states the results; it is difficult to believe that he would give that up for anything.
John Lux seems too good to be true. I was almost relieved to hear him admit: “When they first freed up the gold price, I had just gotten into the business. I saw it go to thirty-two and I wanted to buy a lot because I thought there was not risk. But I wasn’t sure. I knew, but I didn’t know that I knew, yet.
“Other mistakes? Sure. I got burned in a couple of cheap underwritings, terribly burnt.”
Referring back to the gold situation he says, “Just knowing isn’t enough. You need to know that you know. Theory without nerve doesn’t lead to action — and in the stock market, it’s action that makes you money. the real quest is to develop confidence. that’s the key.”
When I asked him to comment on the current [August 1982] situation in the market, he said, “Bear markets don’t last much more than a year-and-a-half in my experience. I think this one is pretty old. when the market is down and things look black, I start ordering annual reports like mad. Prices won’t stay cheap too long.” Raising his index finger and gesturing upward he added, “The type of stocks I play are a one-way street and that way is up.”
Too bad there’s no John Lux stock on the market. This would be a great time to buy.
The Love Of My Life
While in New York, John Lux worked like a demon. “My schedule during this period was spent almost entirely on stocks I lived hear South Street Seaport. I got up in the morning, grabbed and egg sandwich at the deli, walked the five minutes to my office on Wall Street, and ate at my desk. I got there at 8 am and started devouring the news, all the news. By the time the market opened, I was ready. My assistant brought me lunch at the trading desk but usually I didn’t get to eat it until after the market closed. I then worked until 11 PM – a 15 hour day. And on the weekend, I caught up on my sleep and did my laundry and went to work, working again to 11 PM. Sunday, 8 AM to 11 PM just the same. About 100 hours per week.
When the market was closed, I was reading annual reports. In a three month period, i would fill a dumpster, causing most in the office to feat that the floor would collapse.
I recall one time I was working Saturday night and I started laughing uncontrollably. I had realized that they were paying me to do this and I thought this was hilarious, as I would have paid them to do it.
When you love something this much, you are good at it, aren’t you? When you spend all your time on your love, you become an expert, don’t you? You learn the secrets of success or you fail fast on Wall Street.
Authority
Sometimes information in the financial markets can be hard for others to understand. Few understand the ramifications of the government’s rescue programs in the attempt to save the markets this year.
Sometimes information is hidden deliberately. Sometimes the information is false and handed out by those who would take your money or excuse their failures.
Sometimes the information is true and valuable but people refuse to believe it.
I recall trying to get people to buy stocks the week after the 1987 crash when there were incredible buying opportunities. People were in such shock that they would not listen.
In this swamp of information that exists in the financial markets, what constitutes authority? Who do we rely on? Who will provide the basic foundation of thought that we need to evaluate things?
I propose that those persons who have best demonstrated their results should be the only authority.
Being famous and popular counts for nothing and in fact may be counterproductive. An investment advisor who is widely followed may have trouble accumulating a position as others buy ahead of him after learning of his choice.
Education and scholarship counts, but only if it produces results. Clarity of communication counts but only if following that advice produces results.
Even prior results may not be enough. If the methods chosen are based on temporary conditions and are not basic enough to work in the future.
Finally, information and methods, no matter how valuable, have to be understood and capable of being implemented to really have value. They also have to be proof against misapplication All the above, we can provide.
However, in the stock market, you want to buy at the low and sell at the high. In order to do this, you must be disciplined enough to stock to your principles against all other advice or emotion. There are those who are too tormented by the emotions of the moment, too caught up in the madness of the crowd to win. The discipline you need to do this, we cannot provide. We can only give you the rules you need to pick stocks that gain rapidly.
I recall that I got my clients into one low-priced stock that rapidly rose from $0.50 to over $4.00. When I told them to sell at the high, I was uniformly castigated for being a turncoat in not supporting the company and being a shameless capitalist. I sold anyway, but even my wife berated me for doing so.
Unfortunately, in the next year the company was the victim of crooks and the stock became nearly worthless.
So you have to go against the crowd, and that willpower I cannot sell you in a book.
New and Old Data
There are many books on investing out there. Much of what is written in them is true in the fact that following their teachings will result in profit. The profits may be consistent, but generally they will be modest.
However, we are seeking Home Run Stocks – stocks that double or triple in six months to a year.
In order to achieve this goal, we need to discard the old methods. They may work, or they may not, but they do not return as much as 300% per year.
In order to get these types of returns, we not only have to abandon the old methods, the old experts, the old ways, we have to focus on those few ideas that can produce these types of gains.
For example, the theory that all stock prices are random and we cannot predict prices will have to be discarded. We have to be able to predict.
No one technique will do. Instead, we will have to have at least two techniques: one to be able to spot undervalued situations and to one to predict which of these undervalued situations will rapidly appreciate.
Further, we will need a technique to spot when the stock will start to make this large move. We do not want our capital tied up for months in something that is not moving yet; we need action.
Finally, we need to know when to sell. Selling too soon or too late will both reduce our percentage returns.
We are seeking, you see, the highest profit in the least amount of time. And in order to ramp up our returns to the highest possible rate, we need to throw out the old information, the old gurus, the old methods and focus instead solely on those techniques that really have been proven to produce the superior results we demand.
Why You Lose Money in the Stock Market
You lose money in the stock market because (1) what you think you know about the market is wrong, and (2) there are things you do not know about the market.
First, much of the conventional wisdom about the market is dead wrong. At one time I was interviewing a young lad graduating from the MBA program from one of the top business schools in the country. His resume was impeccable; he had even interned at Goldman Sachs. He wanted to be an OTC trader and as Vice President of Trading I had to decide his fate. I told him that I was always interested to know the latest wisdom from the top schools and asked him to provide the best of these pearls of wisdom.
He told me that the most important thing he had learned was that stock prices were totally random and that no one could predict them. Naturally I asked him if that were the case, how he would earn a living as a trader.
End of interview.
The fact is that stock prices are not random. While there may be a random element of in trading, prices are largely predictable.
I believe this drivel was dreamed up, or at least used by, incompetent brokers who had to explain losses to their clients.
As my next example, I give you the idea that you have to take more risks to get larger returns.
More drivel. The largest profits are from stocks that start out wildly undervalued, right?
To make a huge gain, a stock has to go from very underpriced to very overpriced, yes? Now I ask you, isn’t there very little risk in buying greatly undervalued stocks? Yet they are the ones that give you the most gain, right?
So the rule actually is that the greatest gains have the least risk!
If you want to find out more about what know that is wrong and what you should know, you have to read my book, “How to Find a Home Run Stock” and do the course.
Hot Stocks Today — Hot Stock Picks
Hot Stock Picks
Our purpose here is not to make stock recommendations; we want to teach you how to find your own stocks fast.
So we are not going to now make stock recommendations or give you hot stock picks.
We can analyze some hot stocks and show you why you would have been interested in them, so you can see the method at work and better understand how to find your own sizzling hot stocks.
Take, for example, MNTG.
In the last five months, the stock is up from just under $1 to over $3.48. Not a bad annualized gain – 350% per year plus.
This certainly fits our definition of a Home Run Stock which is double or triple in six months to a year.
Why would this stock have been of interest?
Simple, with a book value of $3.50 and cash per share of $1.43, the stock was clearly undervalued near $1.00. While the P/E ratio is higher than we like, the market value of the company is only 14% of sales, even at a price of $3.48.
Tracking the trend and waiting for a breakout, we would have been buying at prices near $1.00 when it broke its down trend.
This stock also shows us how news travels.
Now that it has been announced that that Ohio will permit slot machines at racetracks, the stock jumped more than 50%.
But it was rising for the last several months. Would not have some people known that this was under consideration? Perhaps they would have nibbled away at this stock and caused the rise to about $2 before the announcement? Would not the insiders or those close to the company been in earlier than general public?
Here is another, similar find, Dana Holding Corp. Dan recently rose 48% in one day, reaching $1.73.
The company is losing money, but the book value is $10.42 and the cash per share is $5.48. So at a low of $0.19, we would consider it dirt cheap when it started its uptrend from its low.
Even had you paid as much as $0.50 for this one, you would have seen it jump 500% in a little over two months.
Boys and girls, can you say “New Ferrari?” If you had only had read the book, this stock would have helped you to pronounce these words faster than you had probably imagined before today.
So using our methods, you have had two of the top gainers in one day. Buying them over the last few months would have given you two home runs. The nice thing is that you would be in them at bargain prices and you could be confident that they would not be going lower.
Had you actually had the gumption to buy “How to Find a Home Run Stock.”
Learn Stock Market Investing
Learn stock market investing
If you really want to learn how to invest in the stock market, you could spend tons of time reading tons of books, or you could find all of the best rules presented clearly in “How to Find a Home Run Stock.”
The material in the book was developed first for my own benefit as a stock trader, a market maker, and then so I could teach people who wanted to work on the trading desk or become stock pickers. I needed to teach them simply, rapidly, and in a way they could understand. So the material in the book is presented simply. The material in the book is concise. There is not a lot of extra material you have to wade through. You can read and understand clearly what you have to do.
I spent all the time buying and readings tons of books, magazine articles, and newsletters. I paid tons of money for expensive stock market courses that really didn’t deliver. I tested them in real time with real money. If they lost, I threw them away fast. If they worked, I kept using it.
So save your time, save your money, and avoid losing money on other systems. Buy and read my book!
Its that simple.