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A Whole New World

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The events of September 11 have left an indelible mark on our minds, our hearts, and our national psyche. As minor as it may seem in light of the tremendous human tragedy, the attacks also left their mark on clients’ portfolios, and changed our view of the investment landscape. Given the profession we find ourselves in, we must examine with clear heads the new lay of the land.

The near-term future map of our markets will have to account for a prominence of defense- and security-related companies, chief among them those that focus on biometrics, e.g., Invision Technology (INVN), Visionics (VSNX), and OSI Systems (OSIS). Videoconferencing–e.g., Picture Tel (PCTL)–has also recently plugged into what had been ever-elusive stock price gains. (Such stocks were the green spots on the “Heat Map,” which is similar in intent to the’s map of the market, but better in function for the tech sector and pre-market ( While the latter company and its type are self-explanatory, the former genre is really just coming into view. Basically, biometrics includes face, voice, or fingerprint recognition systems that can detect, for example, one face in a crowd of thousands. Other companies that manufacture full body X-ray machines, or chemical sniffing systems used to detect bombs, also recorded gains.

Defense stocks also jumped up, and Northrop (NOC) and Raytheon (RTN) were among those who gained ground. Raytheon had a piece of less-well-known news that looks suddenly relevant (rather than a mere puzzling feat of engineering): On August 25, it successfully landed a 727 civil aircraft using a military Global Positioning System (GPS) landing system. The plane, a Federal Express 727-200 aircraft equipped with a Rockwell-Collins GNLU-930 Multi-Mode Receiver, landed using a Raytheon-developed military ground station. The new news: This technology could be used to land a plane in the event of a hijacking.

Raytheon and Northrop look well positioned to sustain their current price levels based on existing valuations and current political conditions, but the smaller-cap niche biometric and videoconferencing companies’ sudden surge in stock prices, while flashy enough to get most investors’ attention, may not pan out in the long run, since the jumps were the result of an external event rather than a new product initiative or sales achievement. Among the only ones that looks like they have enough legs to stay the course are the ones referenced above. Also, P2P, which I’ve written about before in the form of–there are other players in this space, too–could gain some ground. That said, all the above referenced companies are on my watch list and one or two could make an appearance on this page in the coming months.

In the meantime, many investors could easily look at the market activity in the past month as a fall clearance sale. While the temptation may be to buy indiscriminately on labels that seem cheap, a true bargain hunter (or the husband of one) knows that an ugly Prada pocketbook at half-price never performs if left in the closet whereas the no-name purse that was picked up for one-tenth the price stays in rotation, no matter what the season. In other words, a bargain isn’t a bargain if it doesn’t work for you. The three companies spotlighted this month are all cheap and, I think, all have reasonably good outlooks.


Gentleman Callers

Lightbridge, Inc. serves upstanding cell phone customers while stamping out fraud

Keeping corporate clients happy is at the heart of our next company’s business plan. No, I’m not talking about the world’s oldest profession. Instead, I’m talking about one of the world’s newest professions: Lightbridge provides mobile business solutions that, in industry jargon, support the “complete customer lifecycle”–customer acquisition, payment, and retention. This Burlington, Massachusetts-based company began in 1989 with a Credit Decision System that simplified the process of applying for a cellular phone. What had taken hours or days to approve could soon be done in the blink of an electronic eye.

In the intervening years, Lightbridge evolved their products to suit their clients’ need to stay competitive in a dynamic environment. Currently at the heart of this is Lightbridge’s Customer Acquisition System, or CAS. CAS is a software product that allows customer acquisition while simultaneously combating subscription fraud and controlling risk. It’s useful enough that industry heavyweight Sprint PCS just renewed its contract for an additional three years.

While Lightbridge is in a low-margin, commodity-like business, it’s not a trivial decision to extend what amounts to virtually unlimited credit to a cell phone user. In addition to the standard problem of people with some money problems honestly unable to pay a $100 bill, you also have to contend with the kind of scam artist who sells “discount” on-the-street phone calls to immigrants’ home countries, then disappears after ringing up $10,000 in foreign tolls (or sells the phones for cash to the street hustlers who do this). The kind of intelligent software that can most effectively spot fraud while raising the fewest false alarms (i.e., turning down good potential customers) depends on an established system with massive data and experienced people, and the value of such a system is commensurate with these same abilities and the dollars at stake. As the business becomes increasingly competitive, Lightbridge is well positioned to provide its clients with a bridge from products to profit.

Short-term prospects for Lightbridge will surely depend on how sustained the interest in the wireless industry turns out to be. After September 11, demand has been surging, but more significantly, we’re nowhere near the saturation levels seen, for example, in Japan. With 28 million shares outstanding, Lightbridge has a $250 million market cap. Consensus earnings per share estimates for 2001 and 2002 are positive at 0.70 and 0.81 respectively. And with a P/E of 13 times trailing earnings, Lightbridge looks attractive at the current trading range of $9 a share. While analysts aren’t predicting a whole lot of growth, the numbers show potential for growth at a reasonable price–a welcome find in any market.


Location, Location

Lost? With its global positioning devices, Garmin Ltd. may know exactly where you are

While GPS depends on satellite transmissions, the service is free (or rather, paid for by our federal government). It doesn’t sell advertising, and it doesn’t really provide any information other than distance and time codes. So GPS isn’t really a telecommunications service, but rather a piece of hardware that always knows where it is as long as it’s outdoors in reasonably open terrain.

If you know boats, you probably know Garmin Ltd. Its handheld global positioning satellite (GPS) devices and sonar depth/fish finders, which can now be had for close to $100 (and are now sometimes included free with outboard motors and other outdoor products), are increasingly ubiquitous in the hiking and boating markets. While big-water boaters have long known of the utility of such devices, inroads in the hiking market should prove more and more important, as there are a lot more people around who hike at least occasionally than there are people who own boats.

The GPS system used to be encoded to reduce accuracy on civilian systems to about 100 yards, but in May of 2000, this “selective availability” was deactivated, and civilian GPS systems are now usually accurate to 10 yards or less. The military may decide to turn the codes back on if, in time of war, it appears that our enemies might use GPS-guided weapons (similar to some of the bombs that we have been dropping on Afghanistan); such a move would degrade the civilian GPS system’s accuracy, probably to about 100 yards, as before. Such a deliberate degradation might be global, or could be applied regionally to an area of concern.

Garmin shares the cheap handheld GPS market with Magellan, several competitors for higher priced GPS units (with high resolution screens and maps), and sonars. Garmin shares aeronautical markets with the likes of Raytheon, and as a growing presence in automobiles and Palm handhelds.

The firm was founded in 1989. Their series of firsts includes the first GPS that interfaces with a plane’s autopilot (June 1991), the first portable GPS with a moving map (August 1993), and the first handheld combination GPS/VHF marine walkie-talkie (July 1996). Garmin has been the industry leader in aviation GPS since 1993 (handheld) or 1998 (panel mount).

Garmin is based on Grand Cayman, with major offices near Kansas City, in the UK, and in Taiwan. The company is run by engineers. Dr. Min H. Kao and Gary L. Burrell are co-chairmen and co-CEOs, serving in those positions since August 2000. Burrell was president of Garmin from January 1990 to December 1998, and Kao has been chairman and a director of Garmin since January 1990, and president since January of 1999. Dr. Kao holds a Ph.D. in electrical engineering from the University of Tennessee, and Mr. Burrell holds an M.S. in electrical engineering from Rensselaer Polytechnic Institute.

The company’s stock price is currently $16 per share, just above its IPO price of $14 on December 7, 2000. Its 52-week low was $14.40; its high was $25.13. The September terrorist attacks have certainly hurt discretionary purchases and also the general aviation market, so as with just about every business, trailing earnings can’t just be slid forward. Still, with a P/E of just 14 times trailing earnings of $1.11, Garmin’s share price allows some room for a slowdown. The firm has 107,875,000 shares outstanding, and at $16 per share, there’s just over $1.7 billion in market cap, about four times the firm’s latest revenue annualized. (GRMN pulled in $104 million in revenue for just the year’s second quarter, up 10% from a year earlier.) Not only does this place Garmin on my map for this market; I suspect it will be visible on my radar for years to come.

Web Site

See Jane Learn

To sort out the complexities of world events, try

When it comes to military and geopolitical news, facts, and technology, Jane’s Defense Weekly and its related publications are the global gold standard. At, you’ll find summaries of posted stories, along with links to the Defense, Transport, Aerospace, Security, and Business areas.

Noted for its hard-hitting defense and terrorism-related articles, Jane’s calls itself a “global early warning service” for investors and businesses with foreign assets. The site presents quite a bit of free information and article summaries, but the full text of many of their most interesting articles requires purchase (not cheap: ranging from $36 for a single article, to about $1,000 per year for full service). Jane’s is a voice that can be skeptical of US tactics without being anti-American; for example, the site’s authors recently voiced fears that America’s relying on aid from Pakistan may result in the fall of that country’s unelected military leader, General Pervez Musharraf, and his replacement with an overtly anti-American and pro-Taliban government (and one with perhaps 25 nuclear weapons). Also, what intelligence did Russia give the U.S. indicating a major Al-Qaeda build-up, and why was so little done against them before September?

A recent article on the Taliban’s military forces, a free extract from Jane’s World Armies, lists troop strengths and ethnicities (of the 45,000 total, close to 10,000 are Pakistanis, and about 500 are Arabs under Osama bin Laden), weapons, and Jane’s assessments of tactics and training.

In addition to Jane’s Defense Weekly, Jane’s offers: the Foreign Report, with news on foreign governments’ economic policies and election predictions; Jane’s Chem-Bio Web; Jane’s Airport Review; Jane’s International Defense Review; Jane’s Transport; Jane’s Missiles and Rockets; Jane’s IntelWeb; Jane’s Intelligence Review; and Navy International.

A lot of this is primarily of interest to people in the armed forces, and academic and political military analysts, but a lot is also useful for multinational investors and businesses, and just plain interesting for the rest of us.

Currently, global security and terrorism is much in the news, which is a two-edged sword for Jane’s. It gives them a lot of interesting stuff to write about, but it also means that the mainstream press is competing with them for every story. In more normal times–we can only hope they’ll become normal again soon–Jane’s has the field pretty much to itself. And in these abnormal times, Jane’s is a far more rigorous and experienced voice in security issues than you’re apt to find on TV.

Another good source for information on foreign countries are the CIA Factbooks at They’re like a good world almanac, but more complete than most, and up to date.

Each entry shows a map, a short history, geography, people, government, economy, communications, transportation, military, and transnational issues, such as territorial disputes or drugs smuggling.

Another source that covers some of the same ground in greater depth is Arab Net ( The main page of Arab Net primarily links to the latest wire service stories concerning the Arab and Muslim worlds. But from their main page, one can also “select a flag for country data” for history and information on 22 Arab countries. Compared to the CIA Factbooks, these links are heavier on prose-oriented looks at culture, lighter on almanac-style lists of facts.

It used to be you had to have a short-wave radio to get the point of view of other governments and peoples. Now, the Web is the place to be. Unfortunately, Qatar’s al-Jazeera TV (suddenly famous for first showing Osama bin Laden’s video “reply” to U.S. strikes on Afghanistan) broadcasts only in Arabic. But there are a lot of English-language newspapers published in print and online from the Middle East, South Asia, and neighboring areas. Some are such transparent government rags, or reprinters of AP reports, or have such limited English, that they’re not worth bothering with, but others have original and unique English-language content. Here are some of the most interesting: For the Iranian viewpoint, visit; for that of India, try or For the Pakistani perspective, check out and With Russia playing an important role in the current political situation, can also provide valuable insights, and the latest from Chechnya can be found at