Weekend Reading from the Gumshoe

By Travis Johnson, Stock Gumshoe, January 25, 2008

Hello out there, happy investors of Gumshoe Land! For your pleasure this weekend I thought I’d revisit a couple old teasers that have been making the rounds again, since the emails about them have been piling up and, in some cases, the companies may have gotten more or less interesting.

The first one is the “Starbucks of China”, from Green Chip Stocks — a sustainable coffee company that supposedly have some exclusivilty deals with a few locations in China. We first saw this one a couple months ago, and I still like their coffee and, morally and ethically, I like their business model of being grower-owned … but I can’t say that I’m any more excited about the stock than I was then. They did successfully change their name and their ticker symbol, but have been unable to change their share price, still at about 40 cents. They also didn’t manage to open up their first Chinese cafe by the Fall, but now they say they’ll have it open on Leap Day this year (February 29) — maybe that’ s a lucky day in China or something. You can read up on this one here if you missed it the first time around, pretty much all I’ve seen from them since then is “we’re still in business and trying to get moving” kind of announcements.

Actually, to tell you the truth, I’m much more interested in the actual Starbucks than I am in any prospective competitor — It seems to me that their current problems and strategic revamping might be an excellent opportunity to buy into a massively successful global brand that still has a lot of room to grow. I haven’t bought shares, but it does enter my mind at these prices.

And Andrew Mickey is still sending out the same ad for the breakthrough technology from the US Defense Department that might turn $5,000 into a million bucks. The technology, of course, is GPS, and the company remains the same — the dominant provider of chipsets that allow for location awareness on cell phones using cell towers instead of satellites. This company still has to be SiRF Technologies, and I’ve actually been getting tempted by it recently. There are risks of competition, but it’s also true that the market is large and growing, and SiRF has the dominant market position and is expanding it’s offerings. You can see my original writeup on it from July here, and there was a good article from an analyst about their product offerings and the competition in Forbes here. This is one that I like more now than when I first heard about it six month ago — it looks like their market positioning and their growing branding efforts are giving them the potential to build on, rather than lose, their huge market share. It just might be that this is a situation like Intel a year or so ago, when they were under siege from AMD and seemed like a wounded monopolist whose brand didn’t mean much any more. Turns out, Intel’s monopoly is just fine, they ended up creaming AMD, and the stock had a very nice run. I don’t know that’s what will happen, but I am getting interested in SIRF at a forward PE of around 25.

And finally, with Gold now well over $900 I’ve seen similar teasers from a variety of Taipan publications about “no risk gold” and “government guaranteed gold.” It has been nearly a year since I wrote about this, which is an Everbank MarketSafe CD product (and Taipan gets a commission for sending folks their way, which must be a good deal for them because they have yet to go a month without pushing one of these CDs — Everbank also does them for Silver, for Japanese real estate, and a few other things). The initial writeup I did last April is here, and it’s true that this is a way to guarantee no loss of principal, but I would urge you to take a very careful look at the fine print and understand how they determine the return on your gold CD before buying one — it doesn’t just follow the daily price of gold, nor does it just compare the price of gold today to the price at expiration, it uses several set dates during the five year term to set an average valuation based on the the spot price of gold over that five years. A little complicated, and it might work out for you, but in this case the fine print really means something. What you really want to look at are the term sheets, linked from this page that explains the MarketSafe CD. Note the dates, the formula they use to figure out your return, and, perhaps most importantly, the “theoretical return” that a CD with these terms would have given you — if you had bought one of these CDs at any point between 1980 and 2000 (they weren’t actually available then), you would have significantly underperformed treasuries, or even, in most cases, passbook savings accounts or regular cash CDs. So