THE REAL ECONOMIST: MICRO CAPS HUNTING (Part 2) THE FOUNDER

Tuesday, February 17, 2009

MICRO CAPS HUNTING (Part 2) THE FOUNDER

The beauty about micro caps is that they are easy to understand as compared to the BIG BOYS, the so called Blue Chips, (maybe you can call them Black and Blue Chops these days ). In this session, I want to discuss the difference between the founder and the other guys. The founder and co-founders if more than one, are the people that give light to the corporation, They could be scientists, professors, business owners, real estate tycoons, or just anybody who wants to start a business with the goal of making money. What I have noticed, is that most founders have a better attitude towards their company than the next guy down the block. He/She( or they), will be dedicated to the success of their company more than anybody else. They are dedicated and they devote most of their time to well-being of the company. Once the founder departs, because of sickness or other reason, the guy down the block steps in. He or she will have a different idea about the company. That could translate into an incentive. Will the new person do the job if the price is right? Will he/she be able to bring his friends in so they can raid the company with creative financing? Will he/she be able to run the company down because he has conspired with a competitor? Will he/she be careless and wasteful as long as he/she gets his/her salary, perk and bonuses? Will the accounting be more transparent as it was with the founder, or will it contain more hidden and forbidden liabilities? The good thing about the founder is that he/she will try to create longevity for the company through some sort of nepotism. The successor could be a child, a younger sibling, a spouse, an in-law or more distant relative. The founder, if he succeeds, would be more interested in the development of his/her successor than the other guy. I have seen companies like LMTI that are classical when it comes to this. And this one may involve the entire family. LMTI, known as Laser Master is not a laser but a gift wrap company. The founder has his children working for him, and together they have weathered many storms in protecting this company. Bottom line is that I am not against the other guy. I am just saying that I will favor a company with a founder if I am seeking longevity in a micro cap. The price of a stock could go in many directions, because I consider the stock as the soul of the body, while the company itself, as the body. ((Laser Master (LMTI) is company with its stock quoted on the Nasdaq bulletin board. Past performance is not indicative of future performance. The mentioning of this company was not intended as solicitation to buy or sell this security but for discussion purpose for the blog on MICRO CAPS HUNTING ( the founder). Usually, the risk of investment losses is higher with micro caps than larger and more stable companies. ))

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Tuesday, February 17, 2009

MICRO CAPS HUNTING (Part 2) THE FOUNDER

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