Tech Notes - Examples
By adiffer on Apr 22, 2008 in EGO Investment Club
Anyone who was around a few years ago knows how an unstable electricity supply can shake things up for industry and investor confidence and especially in the bond market. So when you read between the lines on this news release they are saying that they aren’t making any promises, but that they are pretty confident we won’t run into that kind of buzzsaw again.
You might see this in the news Monday after the conference call and photo opportunity are staged, but the release went out a little earlier today.
2008-04-22: On occasion we see press releases from companies that address projects they are working on with in-house talent and money. These press releases get sent far and wide and occasionally reproduced by media sites that think their readers will care. At the ends of these releases the companies tend to place boilerplate paragraphs describing their company and their ticker symbol if they have one. One such project that recently gave a demonstration is Boeing’s fuel cell powered airplane. You can see an article on it at Green Car Congress.
From an investment perspective these releases are news events that can influence the price of stocks and bonds. When you read them, you have to decide what the influence will be and whether or not you will act. What you look for depends a lot on your particular investment style. If you gamble on momentum you will think about what other investors will think when they read it. If you prefer the value game you will think about what the news means for long term earnings and costs. Growth players look for how the company might improve their share of their market or enter a new one.
It’s usually safe to bet the company released the information hoping it will make them look good, but they can’t come right out and predict what it will do to their earnings or any other number that will influence stock and bond prices. If you don’t know why that is look up what happens to corporate officers who permit that practice. Shareholder lawsuits, big fines, and jail time are strong possibilities. Yet they still release these stories and we still look at how our investment positions might be altered, so we learn to read between the lines. If you are good at it you can probably work as an analyst. If not, it’s best to not act on the news or pay for the analysis.
In Boeing’s case, they are on record saying they don’t expect fuel cells to appear in a major way in commercial passenger jets, so that would seem to preclude entrance into new markets for fuel cells, right? Growth investors with Boeing positions might move on to the next press release when they see this tidbit. However, consider this from the perspective of companies producing fuel cells. Boeing has just proven that something involving their products can be done. They haven’t shown it can be done economically, but they have proven that some of the potential technical hurdles can be jumped by actually building and flying the test airplane. Does that make for a growth potential for the fuel cell vendor? Maybe. More research might be worth the effort or purchase cost.
Note that Boeing made this demonstration with a two seat general aviation airplane. They also took off from the ground with a combination of battery power and fuel cell power. They didn’t restrict the power supply to fuel cells until they where at cruising altitude and flying level. They also mentioned that this approach could be used for small manned and unmanned aircraft. At the end they mention that this is an industry/university effort. What does all this mean if we try to read between the lines? Fuel cells provide power to propulsion via electricity, so such an aircraft would cruise on an electric motor. That would lead to less noise and might matter to folks who want to be more stealthy as they watch you with unmanned cameras. Would that be valuable in the defense and security markets? Probably… if it can be done economically. Another thing to realize is that industry/university projects keep students in the innovation cycle and that makes for the cheapest research a company can buy. It’s also good politically and it looks and smells like money brought in to a district. You can bank on that when it comes to dealing with legislators, governors, and other political figures. If you are a value investor that would be worth noting as it demonstrates a good political strategy by the company. Never forget that voters can change the market rules and undermine a long term position for a value investor.
So what should you do with a press release like this? The default answer should be ‘nothing’. If you do day trading, you know you need to see the release before most others do if you are going to benefit from an emotional response by the market. If you don’t get that kind of information, it is more likely that someone else will be profiting off your response than the other way around. If you work the longer cycles you need to read between the lines and respond before others do. If you wait too long, again, you will be the one coming in too late after everyone else has already adjusted the prices to the news. Remember that ‘nothing’ is most often the best response.
However, if you can see something you think others will not see, you might want to act. If you do that a lot on a variety of subjects and market niches, you need to see a shrink regarding your delusions. The best analysts tend to focus on few areas in order to make their advice worth buying. If you aren’t doing the same, you shouldn’t be buying your own advice, right? If you are in your area of expertise or have purchased the research details from someone who is, however, you are probably good to go take an educated risk.
So… what did I do with this news? Nothing but a bit of reading and filing away of the information.
