MAY 2012
Greetings & Salutations:
Here lately I have been asked ... in various ways ...
"How do I go about picking winners in the
Small Cap Companies, Initial Public Offerings, Start-ups and
Private Held Companies for Investment?"
Well ... since my personal win/lose ratio is about 80/20 (more
winners than losers), you might expect me to go into some detail
about reading the Financial Statements; looking at Price to Earnings
ratios; using arcane calculus formulations; or observing mystical
patterns in the trading activity of the stock - but - that ain't
how I learned to pick the winners.
In reality, I wasn't much better than most people when it
came to picking winners in the Small Cap, IPO and Private Held
arenas, until I learned ...
How To Win at the Horse Races!
Having grown up in Cow Country (Oklahoma & Kansas), one
of the first photographs ever taken of me was astride a big old
strawberry roan called Katie. -- As my Daddy used to say, "Horses
are like some children. Just when you've got them started
in the right direction, they up and start trying to think for
themselves."
Anyway ... thinking about horses, I remember with pain and
fondness by younger days "punching cattle" on the Stelbar,
Lazy Bar-B, and other ranches. -- I also remember with affection
some of the ardent, avid and obsessed "horse players"
I had known over the years.
Sharing the typical cowboy's love/hate relationship with horses
... "The only animal dumber than a horse is a cow, but the
dumbest animal of all is the one on the back of the horse."
... I had never been a "horse player" myself -- however
-- making money (even by betting the ponies) has always interested
me and I have adapted many of the techniques and methods I have
observed in some of the most obscure money making endeavors to
my own chosen fields of endeavor.
But ... until I attended my first Kentucky Colonels' banquet,
I had kinda chalked-off playing the horses as a lost cause.
Although betting the ponies is a money making endeavor, it had
never yielded any techniques or methods I could adapt to my own
endeavors.
All the horse players I had ever known could do was talk about
horses. If I mentioned a racehorse by name, they could
tell me who that horse was by (father; sire) and who it was out
of (mother; dam). They, they would tell me the sire and
dam of each of those horses, and so forth ... sometimes back
10 to 12 generations. -- They bet the horses based upon the win/lose
record of the horse's lineage.
There was simply no way I could adapt that methodology to
any of my business endeavors. After all, if you look at
the lineage of most successful business people, you wouldn't
find much to indicate that they had inherited a proclivity to
succeed.
Then ... at my very first Kentucky Colonels' banquet, my wife
(Delores) and I were seated at a table with Colonel Bill. --
He was a "professional" horse player.
Colonel Bill had ... for over 30 years ... earned his living
(and a sizable fortune) playing the horses. Nothing else.
He didn't work for anyone; didn't own a business (as such); and
didn't gamble on dice or cards. He just bet the ponies.
To say I was soon intrigued with Colonel Bill would be an
understatement.
Not once in our conversation across that banquet table did
he ever tell me the sire, or dam, of any of the horses I mentioned.
Nor did he ever comment on the physical attributes of the horses;
as did all the other horse players I had known. -- His conversation
was more that of another entrepreneur making money in a rather
unique industry.
With my adrenaline flowing ... I always get a rush when I
talk with successful people in any area of life ... I, of course,
asked Colonel Bill how he had made so much money betting the
ponies while all the horse players I knew were hit and miss winners.
His answer was, "Son ..."
(By the may -- mostly for my lady readers -- when an older
fella calls a younger fella "son," the younger fella;
if he is wise, or wants to appear wise, listens intently because
he is about to receive what the older fella considers to be the
wisdom of his age or life experience.)
" ... gamblers bet the ponies or play the horses.
I don't. Strong horses with good lineages can lose races.
And, weak horses with poor lineages can win races. So,
I don't bet on the horses."
Then, he hit me with his secret ...
"I Bet the Jockeys!"
Colonel Bill went on to explain that if "Shoes"
(Willie Shoemaker - who won over 8,000 races in about 30 years)
was riding in a race, the odds were that he would win the race;
no matter what horse he was riding.
The colonel didn't know much about the lineage of the horses
running in the races; nor did he care (he commented that they
all run about the same speed anyway). But, he knew everything
there was to know about each of the jockeys ... their wives;
kids; family ties; religion; politics; everything. -- He kept
informed about new, up and coming young jockeys who were proving
their winning abilities. And, he structured his betting
to take into consideration that, every once in a while, a new,
untried jockey would defy the odds and beat the older, tried
and proven jockey.
So ... if you want to Win at the Horse Races ...
Study the Jockeys, Not the Horses!
(But, it won't work at the Dog Races because the dogs don't
have jockeys. They just run their hearts out trying to
catch a mechanical rabbit. -- Maybe you can figure out how to
bet on the rabbit; it always beats the dogs.)
After meeting and listening intently to Colonel Bill, I soon
found myself adapting his "Bet the Jockey" methodology
to ...
Investing in Successful Businesses
Not just anybody can crawl up on the back of a horse and call
themselves a jockey ... but ... anybody (and I do mean ANYBODY)
can open a store, create a business plan, or dream-up a business
idea.
The "person" who operates (holds the reigns on)
a business is the "jockey" in the business horse race.
Therefore, when investing in a business, it is most important
to study the win/lose record of the person who is (or will be)
operating the business; the "business jockey."
As I have said before, a business (any business) is nothing
more than a box; whether it be a Post Office Box or a marble
columned edifice. The "real" business is in the
hands and minds of the people who do the business of business.
-- Of course, in order to keep with our current metaphor, the
business is a horse.
By betting on "business jockeys" with the best win/lose
records, you can always pick more winners than losers.
Of course, you miss out on some of the good deals when a new,
untried "business jockey" wins big - but - on the other
hand, if you bet too heavily, or too often, on new jockeys, you'll
find yourself with more losers than winners.
NOTE: That's why, when I get any new business
plan or prospectus to read, the first section I turn to is the
information about the backgrounds of the principals. -- If they
haven't done business successfully before (especially if they
are past the age of 40), I need an awful lot more convincing
before I'm ready to invest.
This adaptation of "betting the jockeys" has served
me well over the years ... that's why my win/lose ratio is 80/20;
instead of the other way around.
Now ... Go Ye and Do Likewise!
Win a few Horse Races. Invest in some winning
companies. -- Just, "bet the jockeys."
Can you stump the old master? --
Betcha can't!
Over the past 50 years (man and boy), I have made bundles
of money in direct selling, service contracting, wholesale merchandising,
entertainment (I was a professional Trumpet player, vocalist
& Radio Announcer), freight forwarding, import/export, retail
merchandising, warehousing, real estate, electronics manufacturing,
finder's fees, closeout merchandising, financial brokerage, business
consulting, steel fabrication, gold and coal mining, offshore
banking, mailorder, writing, and publishing. -- That being the
case ...
No matter what business you're in ... whether you're just
starting, well on your way, or at the top of the heap ... I've
probably been where you are, done what you are doing. -- So ...
Anytime you have a question about 'how' to do something in
your business - or - if you have any comments about anything
I've said in issues of this e-Letter; or if you want to add your
2 cents worth ... just "ask" me or "tell"
me.
Send your Questions, Comments or 2 Cents Worth
to ...
with "Question" - "Comment"
- or, "2 Cents Worth" in the SUBJECT.
If I, personally, don't have an answer to any question you
may ask, I will contact some of the professionals in your field
of endeavor (I will probably know one or more personally) to
get the real 'skinny' for you.
Note: If you want to ask a question anonymously
just tell me so when you send in the question. -- Nobody but
you and I will know who asked the question.
Copyright - 2012, J.F. (Jim) Straw. All rights reserved.