Chip Chop (INTC, FORM, WFR, AMAT)

I did something that I don't often do today -- I bought some options. And I'm also doing something I do even less frequently, which is writing about buying options.

I am not an options expert, and while on the whole I've profited from them in the past my good and bad moves have come close to cancelling each other out. I trade in options on occasion when I just want to take a small flier on a stock, or when I want to leverage an equity position ... or when I've got the gambling jones and there's not a casino nearby.

In this case, I opened a small position in VNLAD, the Intel January 2007 $20 LEAP options. I paid $2.70 for them. I'm not generally a megacap investor, nor am I excited enough about Intel to buy a full share position -- but I think the market is really beating Intel up way too much today and over the past several weeks. I think a 10% gain at some point between now and next January is quite likely, with one possible influence being what I expect to be a significant replacement cycle coinciding with the release of Vista in about a year. INTC at a PE of 14 seems silly -- any hand-wringing by analysts and any reasonable downside should now be priced in, and I wanted to place a small bet on the presumption that they will not long be priced at a discount to the overall market.

Let me be very clear that this is just a little bet -- I could easily be wrong, and I can live with losing all of this investment if that's the case.

There really seem to be two sides to the chip debate lately. My two semiconductor-related companies, Formfactor (FORM) and MEMC Electronic Materials (WFR) are on a tear in the tools and supplies business, but INTC, the heart of the industry, seems to be the wounded giant -- let down by Dell's underperformance today and being circled by upstart AMD, and the other companies in the space seem to me to be wildly unpredictable -- though I am tempted by Cypress (CY) thanks, in large part, to their 80% share of SunPower.

Is the story of the chip sector that RBC is right when they write that Intel's customers appear to be getting choked with inventory, or is it that AMAT's significant order growth means a big capacity buildout is underway to meet growing demand? I have no idea what will happen in the near future, but all the indications that I see from FORM and WFR indicate that capacity is ramping up and that demand for chips of most varieties is ramping up even faster. And past experience has led me to be awfully cautious about relying much on analyst "channel checks" in assessing the health of a company.

I think the popular opinion these days is that the personal computer semi line is just blah -- it's not sexy anymore to build the chips that run the computers that sit on all of our desks or laps. What's sexy is Flash -- people want to be in fast-growth supplies for the Ipod and digital camera markets. My gut feeling is that this will rebound -- and that Vista and the rest of the next generation of Windows software should drive a fairly big market in the faster chips, even dual-core, that will better be able to handle this software. It's hard for me to bet against the need for more advanced personal computers and servers, or to believe that Intel has really been beaten for good by little AMD.

I do believe that the variety of chips now in production for all kinds of products makes the industry much harder to figure out, which is why for my equity positions I've focused on WFR, which supplies the raw materials for all varieties of semiconductors, and Formfactor, which supplies an extremely broad range of top-of-the-line testing equipment for most types of chips -- they should both do well as long as semis in general are in increasing demand. I hope.

But I thought Intel was just too cheap to ignore today. I guess we'll find out in the months to come whether I was wrong on that.

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Multiple Expansion? (WFR, GOL)

I've been thinking a bit about Price/Earnings ratio expansion lately. We all know that when earnings go up the stock price should go up as well and by roughly the same amount, since we're used to big stocks that have relatively stable PE ratios.

But there are two other things that happen with some frequency -- the first is very unpleaseant, ratio compression (also called multiple compression), and that is what has bedeviled nearly all the large cap tech names except Google for the last five years. Earnings climbed dramatically over that time period for Microsoft, Yahoo, Cisco and the like ... but the multiple that the market was willing to pay for those companies shrank just as significantly and the stocks therefore more or less treaded water over that period.

The second is what you really want to see -- not only increasing earnings, but an increasing PE ratio. The Big Picture Blog last month ran a little analysis of PE expansion's role in the market boom of the late 1990s, it's worth a look and it helps to understand the downside of multiple compression that many of those big companies have suffered.

I've seen this expansion with two companies in particular in my portfolio of late, and for two very different reasons.

MEMC Electronic Materials (WFR) has really been a turnaround story, a story truly cemented by their last earnings release and guidance. This supplier of silicon wafers to the semiconductor and solar power industries went from being a very undervalued stock just a year or so ago with a PE of 10, to a fast-growing powerhouse in its segment with a PE over 20. During that time earnings have grown as well, so the shares have had a huge run of just about 200%, though I missed the bottom of the trough and at an average cost of about $16 my returns are closer to 100%. If you look at it mathematically, both the result (PE) and the denominator (earnings) have grown substantially, which means the numerator (price) had to go up quite dramatically. That's exactly what I like to see.

That tells me that the ideal scenario is to look for companies with the potential to grow earnings, but who are not trusted by Wall Street. WFR was very much unloved not only because they were seen as being in a highly cyclical industry in a downturn, but because they were coming out of a financial quagmire. As the earnings increased and the semiconductor industry recovered significantly even as the solar power industry exploded into unexpected growth, the company also began to get its financial house in order and show good earnings, sober management, and reduction of debt. That allowed the Street to trust WFR again and allow them to trade at a higher multiple.

The other company I hold that calls itself to my attention in regards to multiple expansion is Gol Linhas Aereas Inteligentes (GOL) the discount Brazilian airline. I've written a lot about GOL lately (here, here and here to start) and don't want to overstate it, but I do like them a lot and the company is currently the fourth largest holding in my portfolio.

GOL has been growing rapidly ever since the company began operations, and this year their earnings continued to climb the ladder.

But earnings weren't the only thing moving GOL's stock up -- multiple expansion has moved them up just as much. In GOL's case, I think its projected future growth, discounting of Brazilian risk, and growing excitement about management that is allowing their multiple to expand. Just since December, when I first purchased shares, GOL has moved from a trailing PE of about 20 to one near 30 -- that on its face seems ridiculous both for an airline and for a Brazilian company.

But GOL grew traffic more than 50% last year and is expanding rapidly with very little debt, and it seems to me that people are more comfortable with the leftist leanings of South American leaders given their so-far hands-off treatment of the most successful companies in the region (for the most part). GOL in fact benefits from governmental regulation, as air routes are tightly controlled and it would be very difficult for a new competitor to get approval to dramatically expand capacity (not to mention Brazil's governmental control of fuel prices, which helps dramatically to reduce GOL's costs when compared with global carriers).

The market's newfound enthusiasm for GOL, and their recognition that a dollar of GOL earnings is worth more than they had previously thought, is also related to management -- the company is family controlled and recently won an award for their top-notch investor relations and disclosure policies. A careful eye on the press release wires will call your attention to all of their detailed monthly traffic updates and clear announcements of new routes and services, and their company presentations and conference calls are truly illuminating. They seem to take very seriously the need to communicate transparently and effectively with their investors, which is important for all companies but really critical for emerging market companies -- look at Shanda for the opposite amount of disclosure, and you can understand why I love GOL but SNDA makes me very nervous (though I still own it).

That, in its way, gets back to the same thing in my opinion: Trust.

The market now trusts WFR because they have recovered from some financial problems and have clearly set priorities and goals to serve their largest markets effectively, even as they've proven their success in their industry with increasing earnings. That trust means we're willing to pay twice as much for a dollar of WFR earnings as we were a year ago.

And the market is growing to trust GOL as more than just an emerging market airline with big growth potential -- they are proving their ability to manage new services and new routes at reduced cost, and they are going above and beyond the disclosure of most other companies in the world to show their hand to investors. As a result of that (and their continuing rapid growth that we can see in their monthly traffic statistics), the market is willing to pay more for GOL than for a typical South American company.

So where do we look for other companies like this, with both the ability to grow quickly and some kind of hook that will bring them into Wall Street's good graces and allow for significant multiple expansion? One at a time is the only way I know to find them, though I guess you could screen for low and growing PE ratios to start, but it certainly takes a lot of wide reading and some patience.

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Cisco likes Shanda? (SNDA)

**Correction, Feb. 17** Like a lot of folks, I took the news alerts regarding Cisco's SNDA position at face value and didn't dig deeper into the filings. Ooops. That was just an amended filing, Cisco owns the same number of shares of Shanda s they did a year ago. My general opinion still holds, that I like the fact that Cisco's involved with Shanda and I think they're likely interested in SNDA because of the home EZ box business, but obviously this wasn't a change and there's no reason for it to have moved the stock. Shoddy reporting by everyone, and shoddy followup by me

Here's the original post from earlier this week that no longer makes much sense, for what it's worth:**

Like everyone else, it seems, I was quite surprised to hear this morning that Cisco (CSCO -- click to register for free RT streaming quote) had acquired a significant stake in Shanda (SNDA) -- just under 10%, according to the news.

The China Stock Blog has a link to the filing and some notes from an analyst here. The very brief AP article is here. I last wrote about Shanda a few days ago when I highlighted it as one of my worst investments this year.

I'm not sure what to make of this news. Cisco picked up a little more than half of this through Softbank, and I presume they bought the rest on the open market, probably at prices significantly above today's depressed level if they picked up all their shares last year.

But regardless of how they picked up the shares, you'd have to say that holding about $100 million in SNDA shares is significant even for a huge company like Cisco, and they must have a reason.

My best guess is that this has something to do with Cisco's push into set-top home networking devices, which was really called to our attention with their purchase of Scientific Atlanta. I'm just guessing on this connection because Shanda's EZ Box product aims to do something similar, bring an integrated entertainment experience to the home through a box that provides access to online services for music and video and internet content as well as traditional cable TV.

On the whole, I see this as quite possibly very good news -- and the market certainly agrees, having bid up Shanda this morning by nearly 10%. What makes me optimistic about the deal is that this validates, in my mind, Shanda's product and approach -- I'm hoping that Cisco would not have bought in unless they thought the EZ system had promise, and perhaps there's hope for some kind of partnership with Scientific Atlanta, Cisco and Shanda to create a really compelling home device that can jump-start the home-based entertainment and connectivity market in China (especially now that they're cracking down on internet cafes).

I could be reading too much into this, but it's nice to at least imagine that Shanda's effort may not be just tilting at windmills -- Cisco has perhaps given them a little legitimacy that they could certainly use after a very bad six months. I'm hoping we'll hear more about this when Shanda releases earnings.

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This is almost too easy (GOL)

More nice news for Gol Linhas Aereas Inteligentes (GOL -- click to register for free RT streaming quote), the low-cost airline in Brazil that's slowly expanding across South America.

Petrobras, which controls prices for oil in Brazil under governmental guidance, just cut jet fuel prices by 5.3%, according to both Investors Business Daily and Marketwatch articles I noticed today.

GOL already enjoyed the highest margins of any airline in the world, thanks to their keen eye on cost-cutting and their access to relatively cheap jet fuel in Brazil, where they do most of their fuel consumption and where prices were already well below international market rates.

And now ... even cheaper. Gol provided nice guidance for earnings this year and their stock has performed very well, so even my most recent purchase last week is well in the money today ... and now, lower costs on fuel, which means more opportunity for them to either drive profit margins higher or cut fares even further, pressure their competitors, and continue to expand the market.

That's why GOL is one of my favorite companies these days -- sure, plenty of risk in owning an airline stock, especially one in Brazil, but the possible growth of air travel in the immature South American travel market dwarfs the growth we might see here in the States, and this management knows what it's doing (and the managing family still owns a huge portion of the company). Lots to like.

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New buy -- Cemex (CX)

I purchased some Cemex (CX -- click to register for free RT streaming quote) this morning to open a small exploratory position. Bought CX at $58.75 at what appeared to be the beginning of some recovery from the backlash following their earnings release a few weeks ago.

But I'm not a chart-watcher in general, so I can't really tell you if that's technically true -- it just seemed to me that their selloff post-earnings was well overdone for a company with a low valuation relative to earnings and free cash flow, dramatic growth potential, excellent operational expertise, and exposure to many of the key infrastructure markets around the world. It could be that I've just strapped on the cement overshoes for a further decline, but I don't think so.

Cemex is one of the largest cement companies in the world, headquartered in Mexico (though the majority of their sales are now in the US, followed by Mexico, Spain and the UK if listed by individual countries -- though their South American businesses are also growing rapidly and are a significant portion in aggregate of their earnings).

They have been a serial acquirer and look to continue that path, and although their leverage has seemed extreme at times it does appear to have been well managed and well-covered by cash flow, and they are vocal about their financial discipline in acquisitions and their focus on keeping their interest coverage ratio growing -- it's over 6 right now, which means they have no trouble meeting their interest obligations. They are focusing on deleveraging their balance sheet, and they now have such impressive free cash flow -- roughly $2 Billion expected this year -- that they can easily grow pretty quickly without taking on dramatically more debt.

Cement is, in my opinion, an excellent proxy for economic growth and infrastructure growth -- if you think the global economy will continue to grow Cemex may seem promising, and if you think spending on global infrastructure like roads and bridges is very overdue for significant growth in many areas, Cemex looks like a no-brainer. I hold my Northern Orion shares because I believe copper demand from the buildout of the world electrical and plumbing systems will be significant, and it's a similar demand for worldwide basic infrastructure building that made me look at cement.

The other big international player in cement that's publicly traded is Lafarge -- they're planning to buy out their US subsidiary this year if possible, and their stock has also performed quite well recently.

But when you look at the numbers and the plans of these two companies, it's really no contest -- Cemex has a significant lead in the areas that I think are important.

First, in markets -- Cemex is huge in Mexico, of course, and has a good and growing (thanks to NAFTA and direct investment) portion of the US market -- demand for highway building in both of those markets should be significant for many years, and they are also going to benefit from a recent duty-cut accord that should allow them to boost exports to the US by 50% in 2006.

But more importantly in the long term, they are focused on the areas of the world where infrastructure is truly inadequate and it appears that growth could be truly significant. South America is a large area, combined they had South American and Caribbean (ex Mexico) sales that approach their Mexican sales, and I believe (this is also part of the argument behind my Gol investment) that the growing middle class and influx of oil and mining money in Latin America will spur significant development in public infrastructure and housing, key areas of cement use.

And second, in aggressive expansion -- Cemex has been focused on becoming truly global in breadth as well as in reach. They already have a small foothold in the Middle East and in Africa to go along with their large market share in Western Europe and North and South America, but it's hard to call their holdings in the fastest growing part of the world anything but puny. Cemex sells about one-tenth of the cement in all of Asia that they sell in the US alone, and they are very intent on expanding their global reach by acquiring manufactureres with large operations or potential in India and China, and they also are looking at Eastern Europe as an enticing area for expansion. As far as I can tell Cemex has no Australian or Antarctican operations, but otherwise they have laid the groundwork for a march across the globe.

Much of Cemex's growth in this past year, which looks extraordinarily dramatic on the top line, was due to their largest acquisition to date, the purchase of Ready Mix Concrete (RMC). They believe they'll be seeing additional savings from that purchase come through in the coming year, and given their reputation for cost cutting and low cost production I see no reason to doubt them.

And that leads to one of the most impressive thing about Cemex, beyond their very low valuation, solid dividend, and growth potential: their cost management. Cemex maintains very impressive margins, with an operating margin over 16% and profit margin near 14%, and solid ROE of 23% -- those all sound pretty remarkable to me for a commodity business with global competition. Lafarge North America, for comparison purposes, has an operating margin of 13%, profit margin of 6%, and ROE of 8.5% ... and yet they trade at twice the PE of Cemex following their recent burst on takeover news, and have a lower dividend.

Cemex didn't quite keep up with analyst estimates when they last released earnings, and folks seem worried about their integration of RMC and the competition they might see in their acquisition strategy, which explains whey they came down from their recent price of over $70 ... but to me, this looks like a nice opportunity to buy on the dips. I'll be keeping an eye on them to see if the price continues to be weak, and to see what their plans are for acquistions on the other side of the world, but at this rock-bottom valuation I'm pretty happy with what I'm buying today.

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Good EPS for UBS

UBS (UBS -- click to register for free RT streaming quote), which is currently the largest market cap company in my portfolio (thanks to their good month and Google's bad one), is declining a little bit this morning following their excellent earnings release.

UBS, which is the second largest bank in Europe and has a huge wealth management business and excellent exposure to Asia and other emerging markets, reported a 32% gain in earnings (ex an asset sale), and the stock is selling off slightly this morning. They had a big run up to this point, and I expect there are some folks taking profits, but it appears that the real disappointment in the market is that they didn't make as a big a dividend move as some had hoped.

Everyone was expecting a significant dividend boost from UBS, perhaps something to bring them in line with the other big international banks in the 4% range. UBS upped their dividend to $2.91 a share -- a significant boost, but not the kind of increase the Street was expecting, and certainly not the windfall special dividend following the asset sale to Julius Baer that some had hoped for.

I'm pretty happy about UBS's progress -- I like the higher dividend, and that they are continuing a fairly aggressive buyback program as well as looking for more opportunities to expand geographically in their real areas of expertise, wealth management and private banking. I still see significant room for long term growth and am very pleased with the growth they showed last year.

The brokers have had a pretty wild year and I am a little concerned about Merrill Lynch, Bear Stearns, JP Morgan and the like, they just seem like they're too dependent on the US stock market ... and the big banks like Citigroup and Bank of America look very worrisome to me with the inverted yield curve, even though they're looking very cheap at their current low PEs and high yields.

Compared to that group, UBS looked very good to me when I made my first purchase last month. UBS's international business and their extremely profitable private bank look to me like the best way to invest in the financial industry right now with relatively limited downside, great geographical diversification, a solid dividend and potential for real growth as the wealthiest continue to enjoy capitalism's spread and grow their assets around the world. I expect this to sit quietly in my portfolio for a long time, and am not terribly worried that the dividend is going to remain under 3%.

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The Three Horsemen (SNDA, TASR, OSTK)

I wanted to take a moment to post a few thoughts on a few of the worst investments in my portfolio.

First, a moment for brief celebration. All three of these stocks, which for quite some time have been the poorest performers in my portfolio, are now ONLY down on the order of 50% from my average purchase price.

OK, so that's not that impressive -- but one of them, Taser, was down by close to 80% at one point -- so there is indeed at least a little cause for celebrating.

Taser (TASR -- click to register for free RT streaming quote), Overstock (OSTK), and Shanda Interactive Entertainment (SNDA) are all former stock market darlings.

Taser was going to revolutionize law enforcement with their "less lethal" stun guns.

Overstock was going to bring the best of closeout merchandising to the web and drive high volume sales and great customer loyalty that would make Amazon blush.

and Shanda was ... well ... big in China. And there are a lot of people there. And they play these online games, for a few cents an hour, and Shanda sells them the game time. Did I mention that they're in China. And they're on the Internet. Do you know how many people live in China? Wow, it's a lot.

Now that was just the prevailing sentiment on all of these stocks at or near the time when I first bought them, and I fell victim to the exuberance as much as anyone else.

But you know, these businesses are all pretty solid if you strip away the short-term messes they find themselves in. I regret that I've lost money on all of them, but they seem to have a lot of potential long-term upside at today's prices ... which is why I haven't sold them yet.

I have sold companies whose stocks have declined, but I have sold them becaue the business lost it's way or because I lost faith in the business' ability to grow or earn money. That was the case with Great Wolf (WOLF), and with Design Within Reach (DWRI) -- click on the tickers on the top left for those takes of woe.

Taser has recovered pretty remarkably -- I still am a little uncomfortable with the level of hucksterism we see from the Smith brothers who run the company, but I think now that the furor over wrongful zapping has died down and the press releases about every positive instance of Taser use flow freely from the company's flacks, things look a bit more positive. I have always believed that they sell a useful and important product that ought to be carried by every policeman, but now it looks like we're finally concentrating on the upside of the product instead of the downside and the market has really enjoyed that. Earnings are still lagging behind thanks to their well-publicized troubles, but I expect them to return in time ... hopefully no one will notice and we'll get to enjoy TASR chugging back to respectability for several years to come.

Overstock I am really having a hard time understanding. I am very pleased that Patrick Byrne brought in his dad to be chairman, and I still do think that the business model they're running has a lot of promise -- and their sales growth reflects some of that promise. This is the one of the three that I'm closest to considering selling, however -- and one more thing that makes me question management's ability to handle this business may send me over the edge. I think they're a little bit chastened by their huge mistakes from the last six months, and I hope Byrne will leave the short sellers alone and let his lawyers argue his points -- he must realize by now that his bully pulpit has ceased to have any impact on public opinion and now merely calls attention to what the press seem universally to acknowledge is his megalomania or, at worst, his lack of focus on the business. Hopefully daddy Jack can help him right this ship and get growth going -- they've now got the technology infrastructure in place, and the sober leadership on the board, and I like Patrick Byrne as long as he's using his energy to build the Big O, not detract from it. I'm still very much on the fence.

And several people have recently posted questions for me about Shanda here on the blog and at ADVFN. I'll give you the short answer: I don't know what's going on, but I think the next year will be better, not worse, than this past fall.

What it really comes down to now is how well Shanda's EZ system of home and portable devices performs and whether they can really establish a distribution pathway for all entertainment to the consumer, and whether their next wave of MMPORPGs gets to market in good time and to a good reception. I think the market is pricing in negative news for all of that, and I would not be surprised to see pretty weak earnings for this past quarter given their massive changes to their business with free game play and the new focus on the EZ system. That said, I think bad earnings are priced in, and although they don't really provide guidance I expect the news we hear about sales of EZ and advancement of the new games, as well as about the effectiveness of the new free play model for their older games, will be the determining factor for the short term stock price. It could be a wild one, but barring more bad news I'm holding on to Shanda for potential appreciation over the next several years as their market continue to grow by leaps and bounds.

So there you have it -- one company on a serious rebound in Taser, one that the Street and I both have an itchy trigger finger on in Overstock -- a business that should work but that has been beset by management mistakes and bad press, and one in Shanda that seems completely shrouded in mystery in the short term but still with great potential if they can successfully navigate their new business plan.

This is what makes things interesting.

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Fear overtakes greed for Google (GOOG)

It has been a difficult week for our friends Sergey and Larry. Google (GOOG -- click to register for free RT streaming quote) has been taking shots all week and the market now seems to have replaced full-throated optimistic jubilation with soul-deadening pessimism, in relatively short order.

James Stewart, the SmartMoney columnist, wrote last week that he sees Google's depressed share price as very nearly a buying opportunity. After this morning's decline, which is owed almost entirely I think to the current Barron's and Wall Street Journal articles, I'm getting inclined to agree.

Barron's wrote this weekend that the shoals awaiting the good ship Google are becoming more perilous, and that their ability to match performance with expectations is getting more questionable. That's certainly a real possibility, especially for a company growing at this pace that does not provide guidance. They also took Google to task, as did the WSJ this morning, for having some of their quarterly growth come from interest income (following the cash infusion of their huge secondary offering), and having such a high margin business that any fluctuation to the top line moves the bottom line dramatically. The long Barron's article is freely available here if you want to read their whole argument.

I don't think Barron's is pointing out much that is not widely known already -- click fraud, the rule of large numbers, competition, and many other elements could come into play to create a perfect storm that brings Google down to $100.

But that doesn't mean it's likely. We all, as investors in individual stocks, play a game of probabilities -- what are the odds that this company will fail, or succeed ... what are the odds that their products will gain favor, or face scorn? Have the Wall Street bookies taken too much money on one side or the other and tilted the spread too far?

In my opinion, we are all understating the potential growth not only for internet search, but for targeted advertising. While Google's model has many imitators, it has no competitors in online advertising who show any sign of building a better mousetrap at this point. And while Google's competitors try to catch up, Google is expanding their search and targeting capabilities -- video, radio, television, magazines. I think the odds are in favor of Google continuing to keep an edge over their competitors, not least because they are expanding their staff so dramatically and continuing to bring the world's best engineers and programmers into their culture of innovation.

As someone who used to work in direct marketing before my current academic career, I am fully aware that targeting is much more than half the battle in advertising -- the ability to place the right content in front of the right person at the right time is the killer app for marketing. I hope and fully expect that Google's killer app -- which is still really in ints infancy, in my opinion -- will continue to fund a massive Research and Development effort that will in the future make our best prognostications seem foolish in five or ten years.

Of course, "buying opportunity" is not the same as "I put my money on the line". I still own all the Google shares that I bought with an average cost basis just below $200 ... but I haven't bought any more on this decline, and I don't intend to.

Regular readers of my blog and my postings over at ADVFN (register here for free to see those) would note that I've been talking more lately about my caution regarding Google, and about my interest in paring back my outsize GOOG holdings. I still am generally interested in reducing my Google shares to help my portfolio remain well diversified, but I'm not willing to sell them at this price (and I wasn't willing to sell them while I would owe short term capital gains on them).

In general, I'm reluctant to sell stocks that are performing very well or to pay commissions and taxes on gains by trading in and out of stocks to time market movements (even if I could time the market reliably, which I can't) -- unless I can't understand why they're performing and I no longer believe that they have good long term prospects, or unless I see a catalyst in the near future for their decline that hasn't been priced into the stock (for example, a competitor that's growing faster than expected, or a drug nearing the end of it's patent protection).

During my years of investing I have made many mistakes in all kinds of areas, but the most galling mistakes have been in selling too early -- the times when I failed to sell early enough and had to sit through a decline and eventually sold out have been dramatically outnumbered by the times when I sold before several-hundred-percent gains. Patience can hurt, as it has this week with Google -- but in my experience if you're invested in the right companies and understand their business, it's the most renumerative approach.

Google is an amazing company that the Street is having a terrible time attaching a value to. I'm having a hard time too, but the recent decline seems to me to be an overreaction. We'll see.

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