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Hoov's Musings (volume 3, number 3) |
A
Return to Sanity, Part Two
Mark Hoover,
President, Acuitive, Inc.
What’s wrong
with this picture?
I’m sitting here
in a hotel room in a New York City high-rise, working on my March
Musing on April 6th. For two weeks Tim Helms has been
asking me “When’s it coming? What’s the topic?”
I don’t know. I
don’t know.
Meanwhile my friends have headed off for a ball game at Shea without me. To top it all off, I’ve lost a big chunk of my personal net worth as the NASDAQ has gotten hammered continually over the past few days.
Guess which of
these facts bothers me the most?
You’d probably guess wrong.
I’m missing the
baseball game! And
Mike Piazza is playing – the cornerstone of my fantasy league
baseball team!
As far as the
stock market situation goes, in a perverse way, I’m glad that
technology stocks and NASDAQ have corrected.
Many of my friends, who have probably lost a lot more paper
worth than I have, would (possibly physically and aggressively)
disagree.
But to me, the
correction is an indication to me that I don’t have to retire,
learn how to fish, buy a bunch of plaid shorts, and grumble about
whippersnappers and the “good old days.”
As the President
of Acuitive, one of my main responsibilities is overseeing the
investment of our accruing assets.
Recently, I was beginning to think that I wasn’t the right
person for the job. I
think I kind of understand issues like technology trends, related
opportunities, market share, earnings growth, competitive position,
profitable business models, target market growth, price erosion,
technology disruptions, channel strategies, and the power of a
recognizable brand. When
factors like these and similar metrics are applied to determine the
value of a company, I feel pretty comfortable.
But when concepts like future eyeball potential and CNBC vibe
become the main factors that a stock is valued by, I start to lose
connection. When
will’o’wisp companies with 40 competitors and a business model
that depends on future advertising revenue earns a market
capitalization greater than Ford or GE, I scratch my head in wonder.
And when people are paying for a hundred years worth of
present earnings of a $40B company, and I know they expect to recoup
their investment in just a few years, I tend to wonder where the
growth they are expecting will come from since it would result in a
company value in excess of the GNP of every major country in the
world combined.
For a long time,
I’ve been telling myself that the financial markets are just
temporarily skewed due to an influx of money from 401(k) plans,
retirement plans, and institutional money.
But once that influx reached steady state, things would
return to normalcy.
I’ve been saying
that for about three or four years now.
Am I hackneyed and
old-fashioned? Have I
lost touch? I do feel dazed and confused.
But do the people driving the financial markets these days
even know who Led Zeppelin is?
After such a long
time of a market behavior that seems bubble-like, according to my
principles of thought, I’ve had to start questioning my own
principles. The
situation caused me to harken back to when I was a twenty-five year
old hotshot working on new networking technologies, and I’d get in
a meeting with a bunch of pot-bellied, balding, gray-haired people
talking about SNA and I’d think to myself – “The world has
passed these old dudes by. They
just don’t get it.”
The stock market
had just about convinced me that now I’m the pot-bellied, balding,
gray-haired guy that doesn’t get it.
And would you want somebody like that driving your investment
strategy in the age of the “new economy?”
Of course not. Maybe
we need a recent college graduate (or better yet, a dropout day
trader) to run Acuitive.
So I was just
about to reach the conclusion that I needed to eat my Metamucil,
take my Viagra, step down, and move on.
But!
The recent stock market correction has made me think that
maybe the tried and true economic principles of value that I thought
were timeless truly are. Maybe
profitability, earnings growth, customer capture, cash reserves,
market dominance, and unique product differentiation make a
difference. And as
NASDAQ (and the technology sector in general) rebounds, which it
will, maybe it will be more of a stock pickers environment than an
“all boats rise” frenzy of buying anything that smells, looks
and feels dotcom.
If all that’s
true, then I think I have a few good years left in me.
I don’t have to
put myself out to pasture just yet.
And I won’t have
to change the company name to Acuitive.com.
But I still won’t be able to go to all the baseball games I would like to go to.
(volume 3, number 3)
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