Tag Archives: internet

Should You Be A Passive Investor These Days?

Passive investing is over-rated. Robo-investing just rebalances passivity. Do your own due diligence. It pays better. Investors in 2015 may be forgiven if they feel like bobbleheads. The volatility of the markets, the speed with which opinion-holders dispense information about any event (some of it even accurate) and the sheer volume of too much data can make our head, and our thoughts, swing too rapidly hither and yon, leading us to trade wildly, making brokers richer and investors poorer. Of course, there are investors who claim they do not care one whit where the markets are or at what price their securities are selling. They take pride in spending no time studying the ways of the market but, rather, seek only to match the long-term performance of the market they choose to invest in and let the chips fall where they may when there are corrections. Many such investors are adherents of John Bogle’s approach to investing and delight in calling themselves Bogleheads . Whenever I disagree with the premise of that thinking, “the phones are sure to light up” and the comments section will be filled with righteous indignation or derision from these acolytes. The idea of buy-and-hold passive investing and holding a broad brush of securities is hardly new – but its popularity waxes and wanes with the market itself. For instance, whenever the US stock market is doing well as (until this year) it has since March of 2009, people who invest with a rock-steady eye on the rear-view mirror will pound the drum for passive investing via the cheapest ETF. (click to enlarge) But how many of these investors, or their predecessors, really did hold on to their portfolio from Oct 2007 to March 2009 – and if so, what in tarnation were they thinking? As you might recall seeing the chart below, that was a particularly terrifying slide of a minus 53.5% in less than a year and a half. Buying passive index ETFs and holding is popular yet again, looking at the rear-view mirror back only as far as 2009, but those looking backward in March of 2009 abandoned this strategy in droves: (click to enlarge) There has to be a better way of investing than either day-trading between biting one’s fingernails to the nub, or stubbornly clinging to the notion that its OK to hold on during a 53.5% rollercoaster decline because after all, “the market always comes back.” (It’s true that the market came back after 2009 but it took 5 years, 4 months and 15 days to break even, not allowing for inflation. Not very helpful if you plan to retire in 5 years!) My strategy is different. While I would “like” to be able to buy ETFs that do all my thinking for me and spend my time skiing, diving, hiking and traveling, at my age I really can’t afford to see my portfolio decrease 53.5%. Can you? That’s why my approach is an active one. I may tactically employ index ETFs, ETNs or mutual funds to realize my investing goals, particularly in areas in which I do not have the technical knowledge to differentiate among the contenders. In biotech, for example, I’m happy to own a basket of health care firms that includes pharmaceuticals, biotechs, hospitals, etc. I will also, at those times when I see a short-term opportunity for the entire market, use index funds because their greater liquidity allows us to be nimble without paying too much in bid/ask spread to do so. So my overarching strategy, of necessity, is to be an active participant. I use far more actively-managed mutual funds and closed-end funds to populate the foundation of my own investing pyramid, while selecting individual companies’ stocks that are sector leaders for the very top (and relatively smaller square footage!) of that pyramid. With this approach my firm, and I as Chief Investment Officer, has to be better at picking winning companies than those who merely mimic the averages. In doing so, we seek the best companies in the best sectors as measured by growth in revenue; growth in real (as opposed to merely per share) earnings; honest and capable management, preferably with skin in the game; companies that reinvest earnings in capex, R&D, or other avenues of enhancing future value (versus, say, borrowing money to buy their own stock to goose earnings per share 😉 a rate of return that exceeds its primary competitors within the sector; and, finally, companies that represent good value for the price we pay. In my experience all sectors go through periods of price contraction. Assuming the above factors are met, if the sector encounters short-term headwinds, that’s the time we like to buy. Of course, this often means we might be early in our buying. This doesn’t bother any of us if our analysis of all the above suggest there is unlikely to be a better time to nibble, or buy, or buy in size. An example today might be the energy sector, down a whopping 21% year to date. Another would be the content creators and distributors, down because the assumption made by many is that, with the Internet, entertainment and content will become more distributed, lessening the value of creative offerings by the best in the business. When the entire sector declines, that’s the time we like to pounce on the best of the best; companies with the strongest balance sheets will pick up the pieces of firms more highly leveraged and, in so doing, will concentrate even more talent under their roof. Our goal is to pay a fair price for a good-to-great company, not a priced-for-infinite-growth price for a great company. There is no doubt that Amazon (NASDAQ: AMZN ) is a brilliant company. I respect the company but it simply isn’t part of our strategy to pay a massive premium for assumed eternal growth. Sooner or later, success breeds competitors, some with very deep pockets. I remember when University Computing, Polaroid, Xerox, and so many more were alleged to have first-mover advantage “unassailable” moats. The funny thing about moats is they can dry up or be forded. Somehow I don’t see deep-pocketed Wal-Mart, Target, and others rolling over forever in the online world. Give me a solid company at a fair price any day… I’ve written extensively about energy firms before and will again. For all the years I’ve been in this business, I’ve listened to people saying that oil and natural gas or done for. Never happened. Won’t in our lifetime. If somebody wants to sell me Chevron (NYSE: CVX ) at 75 (it’s August low was 70) I’ll back the truck up. If someone wants to sell me their Exxon (NYSE: XOM ) at 72 (its August low was ~69) I’ll back the truck up. Will I hold them forever? No, but I believe I’ll make a fine return until the next time investors panic out of a basic need like energy. So, to answer the question I posed in the headline, “Should You Be a Passive Investor These Days?” my answer is: absolutely not. I am out of sync with the current black box, quant, and robo-advisor thinking so much in vogue today, but I am in sync with the likes of Benjamin Graham, John Templeton, Warren Buffett and Peter Lynch, all of whom sought the best companies at the best price and held them until they no longer offered exceptional value. I’d rather be in the company of such as these any day over the current “You can’t beat the market so don’t even try” crowd! In my next article, I’ll answer the questions, “Who are the best entertainment and content providers?” and “Are any of them worth buying?”

Ocean Power Technologies’ (OPTT) CEO George Kirby on Q2 2016 Results – Earnings Call Transcript

Ocean Power Technologies, Inc. (NASDAQ: OPTT ) Q2 2016 Earnings Conference Call December 15, 2015 10:00 AM ET Executives Shawn Severson – Blueshirt Group George Kirby – CEO Mark Featherstone – CFO Analysts Operator Good day, ladies and gentlemen and welcome to the Ocean Power Technologies’ Q2 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, today’s conference is being recorded. I would now like to turn this conference call to Shawn Severson with Blueshirt Group. You may begin. Shawn Severson Thank you and good afternoon. Thank you for joining us on OPT’s conference call and webcast to discuss the financial results for the three months ended October 31, 2015. On the call with me today are George Kirby, President and CEO; and Mark Featherstone, Chief Financial Officer. George will provide an update on the Company’s highlights for the quarter, key activities, and strategies, after which Mark will review the financial results for the second quarter. Following our prepared remarks, we will open the call for questions. This call is being webcast on our Web site at www.oceanpowertechnologies.com. It will also be available for replay later today. The replay will stay on the site for on-demand review over the next several months. Yesterday, OPT issued its earnings press release and filed its quarterly report on Form 10-Q with Securities and Exchange Commission. All of our public filings can be viewed on the SEC Web site at sec.gov or you may go to the OPT Web site, www.oceanpowertechnologies.com. During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions made by management regarding the future circumstances over which the Company may have little or no control that involves risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. We refer you to the Company’s Form 10-K and other recent filings with the SEC for a description of these and other risk factors. And now, I would like to turn the call over to George to begin the discussion. George Kirby Thanks, Shawn. Good morning, everyone. Today, I’ll review our business operations and provide an update on key activities and developments in the quarter. Following this, Mark will briefly review our financial results. After which, Mark and I will be available to answer any questions. So, let’s begin. First, we’re excited that the Company is continuing to execute on our objectives and achieving considerable progress on both the commercial and technical fronts. As announced in late October, we redeployed the APB-350 A1 power buoy off the coast in New Jersey and resumed sea trials. We also released select performance data gathered during A1’s initial deployment as well as initial results from the accelerated live testing of this redesigned PowerTakeoff system or PTO. Our goal is to provide reliable, durable, and cost effective offshore autonomous power solutions where current power solutions are either too costly or unavailable. The deployment of A1 was a milestone in our long term strategy to achieve this goal and gives us the opportunity to further develop and validate our APB-350 technology. Consistent with our strategy pivot, we also made considerable progress toward our next generation APB-350 product which we expect will feature an enhanced electrical storage system, a higher efficiency power management system and a user friendly interface providing even more flexibility to end users. I am excited to announce that this next generation buoy has undergone its critical design review and we expect that it will achieve a maturity level through extensive in ocean and factory accelerated life testing that will allow us to proceed with the commercial product launch in 2016. As we’ve mentioned before, we strongly believe that our APB-350 represents a very appealing solution which provides a robust and cost effective alternative to incumbent solutions that utilize batteries, solar, wind, and diesel power for offshore applications. As part of our efforts to demonstrate product reliability and durability, and to accelerate toward product commercialization, the Company initiated accelerated life testing on its redesigned APB-350 PTO in the second quarter. The OPT accelerated life testing process consist of operating PTOs in tandem with accelerated operating profiles. This subjects the PTOs to various load conditions which are encountered in extreme sea states. The test simulates an equivalent three year ocean deployment within a period of six to nine months using PTOs that are identical to those of the Company’s APB-350 A1. We intent to use accelerated life testing results to improve and to validate reliability which we believe is critical to our prospective customers. Furthermore as an important component of our commercialization strategy, OPT formed a technical advisory panel during the second quarter of fiscal year 2016. The panel was formed as part of our efforts to accelerate power buoy commercialization and it plays a critical role in developing and further improving our technology and products. The main objective of the panel is to facilitate the implementation of different power buoy applications coupled with specific market requirements. As we previously communicated to you, the panel consist of select potential customers and users and technical and scientific stakeholders, including Guardline Marine services, DNVGL, as well as represented from two major oil and gas operators, a large oil and gas equipment manufacturer and a leading meteorological and oceanographic sensor manufacturer. The University of Western Australia, Centre for Offshore Foundation Systems, also participates on the panel by providing scientific advice related to marine subsea structures engineering. The panelists are reviewing and providing critical industry feedback on requirements and test protocols in order to increase our speed to market. This long term collaboration is initially focused on the APB-350 but it could also extend to future power buoy designs. Moving forward, we will continue to work closely with panel members to maximize the unique opportunities that this long term collaboration provides to us. We’re excited to continue to work with these highly acknowledged and experienced companies and we look forward to continuing to integrate industry feedback with our day to day operations. Additionally, in the second quarter we announced an agreement with Guardline Environmental to investigate the development of innovative metocean monitoring and maritime security systems together. Under this agreement, we will work closely with Guardline to investigate and then potentially develop, test, and market, advanced integrated solutions for end users in the ocean observing and defense and security markets. We are very excited about working together with Guardline who is a leader within the worldwide environmental services market. We strongly believe that Guardline’s 45 years of experience within environmental, meteorological and oceanic studies and hydrographic and geophysical surveys will leverage our technology to further develop innovative applications and solutions that offer potentially revolutionary improvement to incumbent operational practices. Lastly, given Board of Directors and shareholder approval, OPT completed a reverse stock split at a ratio of one share of newly issued common stock for every 10 shares of issued and outstanding common stock. With the stock split completed, we’re now in compliance with NASDAQ listing requirements, and we believe that there is significant untapped value in the current OPT stock price, which we’re intending to unlock through the commercialization of the APB-350. I’ll now turn it over to Mark who will review our financial results in the quarter. Mark? Mark Featherstone Thanks George and good morning everyone. I will now review results for the second quarter of 2016 before we open up the call for questions. For the three months ended October 31, 2015, OPT reported revenue of $25 million as compared to revenue of $1.7 million for the three months ended October 31, 2014. The decrease in revenues compared with the prior year was primarily related to the decreased billable cost on our project with Mitsui Engineering & Shipbuilding or MES and with our contract with the U.S. Department of Energy. The MES project is currently undergoing a stage-gate review with its project stakeholders. The net loss for the three months ended October 31, 2015 was $3.0 million compared to a net loss of $4.4 million for the three months ended October 31, 2014. The decrease in net loss is primarily due to lower selling, general and administrative expenses including reduced third party consulting, site development and patent amortization costs. During the three months ended October 31, 2015, we recovered product development costs from prior periods under our cost-sharing contract with the European Union for our WavePort project. In addition, the prior year included $0.3 million of gross loss due to a change in estimated project cost related to the MES contract. For the six months ended October 31, 2015, OPT reported revenue of $0.6 million as compared to revenue of $3.3 million for the six months ended October 31, 2014. The decrease in revenue is primarily related to decreased billable work for the DOE, WavePort and MES contracts. The net loss for the six months ended October 31, 2015 was $7.1 million, as compared to a net loss of $7.7 million for the six months ended October 31, 2014. The decrease in the Company’s net loss year-over-year primarily reflects increased estimated project costs associated with our contract with MES in the prior year period as well as reduced legal, third party consulting, site development costs and patent amortization expenses compared with the prior year period. These decreases were partially offset by higher product development costs related to our APB350 and PB40 projects. Turning now to the balance sheet. As of October 31, 2015, total cash, cash equivalents, and marketable securities were $10.4 million, down from $14.2 million as of July 31, 2015. As of October 31, 2015 and July 31, 2015, restricted cash was $0.4 million and $0.5 million, respectively. Net cash used in operating activities was $7 million during the six months ended October 31, 2015 compared to $12.1 million for the six months ended October 31, 2014. The prior year reflects the return of $4.7 million related to an advance payment received from ARENA while the current year reflects costs related to increased deployment activity. As discussed in previous conference calls, we have taken a number of steps over the last several months to reduce our cash burn rate while increasing our technical, operating and business development resources. As such, we continue to project that our operating cash burn in fiscal 2016 will be lower than that in fiscal 2015 despite increased deployment activity in fiscal 2016. We remain confident in our cash position and we expect to have sufficient cash to maintain operations into at least the third quarter — calendar quarter of 2016 and we are currently exploring alternatives to raising additional capital. With that, I’ll turn it back to George before we open up the call for questions. George Kirby Thanks Mark. Before we move on to Q&A, I want to highlight a few compelling reasons to consider OPT. One, we believe we are the technology leader in wave energy conversion for offshore applications. Our technology provides a critical offshore power solution for a number of industries. Our technology focuses on driving down cost, improving reliability and durability, as well as broadening and enabling commercial applications. Also, we currently have been continuing to develop significant intellectual property around our technologies and applications. Two, we’re targeting large addressable markets including offshore oil and gas, ocean based communication and data gathering and security and defense. We’re also garnering what we believe to be significant interest from potential customers to develop power buoy applications, which could lead to solutions demonstrations and market launch. And lastly, we consider our staff to be world class and we have a solid leadership team in place at both the executive management and Board levels. We’re executing multiple power buoy deployments in order to further advance power buoy validation, which we believe will service as a near term market catalyst as we move closer to commercialization. So thank you for your support and time today. And operator, we’re now ready to take questions. Question-and-Answer Session Operator George Kirby Well, thank you all once again for attending today’s call. If you do have any further questions, please don’t hesitate to contact us. Otherwise, we look forward to speaking with you all next quarter. Operator Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!