Local.com - Part 4 - Analysis of another speculative upturn

Today the stock closed up 14.58% and there was no news in the media concerning the company. This got our attention especially since we have a speculative position in the company. Looking at the rumor-mill in the message groups, a lot of the talk is about a short-squeeze.

Short squeezes usually happen when there is a large percentage of short interest in the stock and some event causes all of them to want to close their positions. One such event happens when there is a positive news report. Another possibility is when there is a rumor from a source that is believable.

There is another rumor about the possibility of Google acquiring the company. The Google finance site page on Local.com has a comment that was posted 9:07 AM PST today that reads as follows:

Will Google Buy this stock???

Rumors are circulating wallstreet that google are in talk with LOCM!!.
I'm not really sure how true this is but my sources tell me a takeover
might come in before the end of November!1. Don't take my word for
this as I might be wrong!!. But from the look of things and careful
analysis it won't hurt that google will or might acquire this
company!!!. Stock price have really buttom down for the pass week and
I could see a trend reversal starting this week!!. This is not an
information for anybody to purchase this stock as I might be wrong!!.
If you won't to give this a try, please go beyond the takeover and
focus on the fundamentals!!

There are a few responses to this post, which adds up to further pumping.

When you look at the content of these posts carefully, one can notice an obvious bullish pumping tone about them. There is also some hint that the poster received the information from a source that indicated that the takeover might happen the end of November. Such pumping with guesses on wild timings can be popular in Newsgroups as it gives a little bit of authenticity to the post. But, that alone is hard for a stock to rise that much even considering the low float. Looking further at the messages, something stands out to me that add to the authenticity. You are on your own from here on!!!

Local.com Analysis:

1. Part 1 - A Patent Speculation Play.
2. Part 2 - 411 Patent Details.
3. Part 3 - Investment Outlook.
4. Part 4 - Analysis Of Another Speculative Upturn.

Patni (PTI) - Part 2 – Business Issues - Indian Software Outsourcer Research

The company's core expertise is in the areas of Insurance, Financial, and Manufacturing services verticals. The company entered the IT services for Telecom Verticals with the acquisition of Cymbal Corporation in November 2004. In July 2007, it acquired another IT services Telecom Vertical "Logan-Orviss International (LOI)" and around the same time frame entered the Life Sciences area through the acquisition of "Taratec Development Corp.".

Business concentration is an area of concern for Patni - 80% of its business comes from US. One account (GE) contributes to 20% of the total revenue. The company initiated a strategy to diversify the revenue base in 2003. As a result, the GE portion of the overall business came down from about 45% at the end of year 2003 to 20% at the end of 2006. The US portion of the revenue still stands at around 80%, down slightly from around 90% in 2003.

The company had negative news recently regarding an investigation by Department of Labor (DOL). The issue was whether Patni paid less than the prevailing wages to H1B workers in the 2004-2005 timeframe. DOL announced a settlement in June 2007. The settlement amount was $2.4M and was to be distributed as back wages to roughly 600 affected workers. At the time, the press reported incorrectly that the DOL announcement said the amount, if distributed equally will be close $40K/worker. The actual amount, if you do the math, is close to $4K/worker. While it is curious that such a report came out from multiple sources, it is difficult to imagine any conspiracy, as there is no apparent beneficiary from an outsider’s point of view. The settlement is a victory for Patni, given that the amount is very small and no intention of wrongdoing was found - Patni blamed it on accounting error.

Exploiting H1B workers is common among employers, although the degree of exploitation varies. Outsourcers exploit such workers more because they usually hire the worker from a foreign country and so has more "control" over the employee. The crux of the problem is that H1B workers are tied to the company they work for until their green card applications come through. Employers realize they have the upper hand over such employees for a number of years and so are able to exploit such workers. It is common to see the salaries of such employees stagnate during these years. It is also true that the Department of Labor banned several outsourcers because of violations such as not paying the workers, employers filing fraudulent tax returns for employees without actually paying the employees the amounts quoted in the tax returns and the H1B labor certification form, etc.

From the public information available, it is clear that this issue is in the company's past. It is definitely true that a lot of technology companies were in violation of the law. Patni happened to be one of the companies that the DOL investigated. But, they got out of it rather lightly.

Another issue that needs to be looked at is the company ownership structure. The 3 Patni brothers hold roughly 45% of the outstanding shares. It is rumored that two of them have an interest in selling their stakes. Another 16% is held by General Atlantic Mauritius Limited, an investment firm that made a major investment in the company around 2002, well before the company's IPO in India in 2004. Insiders’ holding a significant percentage of the outstanding shares is usually a good thing, as they will have a direct interest in upholding shareholder value. However in Patni's case, it is not clear how much of a positive this is because of the rumor about the brothers wanting to sell their stakes.

Patni Computer Systems Limited Analysis:

1. Part 1 - Financials.
   
2. Part 2 - Business Issues.
3. Part 3 - Investment Outlook.

Patni (PTI) - Part 1 – Financials - Indian Software Outsourcer Research

The following table summarizes the relevant financials of Patni Computer Systems Limited along with a few others for the year-end 2006. The other companies are listed to allow comparison of relative valuations to a representative big-cap outsourcer (Infosys - INFY), a big-cap US consultancy firm (Accenture - ACN), and a similar sized company in the same industry with comparable business prospects (Covansys - CVNS):

Stock (T)	Employees(E)	Revenue(R)	R/E	Income(I)	Growth(G)	Profitability(I/R)	P/E
PTI	13K	570M	45K	130M	17	0.23	18*
CVNS***	8.5K	450M	53K	50M	20	0.11	8**
INFY	70K	3B	43K	750M	25	0.25	34*
ACN	160K	18B	110K	970M	8	0.05	27*

• *** Computer Sciences Corporation (CSC) acquired Covansys July 2007 for a premium of 27% to the closing stock price on April 25, 2007.
• ** The P/E ratio for Covansys was calculated based on the stock price that CSC is paid for the acquisition - $34/share.
• * The P/E ratio for Patni, Infosys, and Accenture are based on the current stock price and earnings as of EOY 2006.

It is clear from looking at the Revenue per Employee column and the profitability column in the table that outsourcers have a cost advantage. Also, outsourcers are growing at a faster rate. Patni should benefit from both of these favorable attributes. Further, fundamental analysis of Patni also looks favorable with a projected growth rate of 17% and a year-end P/E of 18.

Computer Sciences Corporation’s acquisition of Covansys might give a good indication on what a US based consultancy firm may be willing to pay for Patni, should such a scenario occur. Covansys had better projected growth but less profitability at the time of the acquisition. It was acquired for roughly 3 times revenue and 38 times earnings. On revenue multiple basis, Patni might command a higher premium, given their profitability is more than two times better. On a P/E ratio basis, Patni might go for a lower premium, given the growth rate is slightly lower. Taking these two factors into consideration, an acquirer might consider 4 times revenue and/or 25 times earnings as reasonable. That would value the company at about 50% above the current price.

Patni Computer Systems Limited Analysis:

1. Part 1 - Financials.
   
2. Part 2 - Business Issues.
3. Part 3 - Investment Outlook.

Meramec Caverns, Stanton, MO - Review

The web-site doesn’t list an address, but getting there from St. Louis is easy – Drive on I-44 West till exit 230 and follow signs. It is roughly 60 miles from St. Louis and takes an hour to get there.

Unless one has a very good camera and a tripod, it is hard to get good pictures as there won’t be enough light. The best we could do without a tripod is what is shown.

Ticket pricing is $21 for adults and $11 for children ages 5-11. Ages 4 & below are free. The temperature inside the cavern is uniform at around 60 – a light sweater should serve well. The tour guide was well trained. The tour itself is slow paced. The somewhat strenuous part is climbing the 56 steps. But, that part of the tour is optional, although it was very much worth our while. The kids held up really well. The café inside the cavern is reasonably priced. The gift shops also offer reasonable deals.

Last Updated: 01/2015.

Teach your kids Piano with learn piano online for free – well, almost!!

Yes, it is true! You can teach your kids piano almost for free. Lisa, at learnpianoonline has a wonderful program that resulted in our 7-year-old reaching Lesson 7 over the course of a year and a half. Lisa’s program is free for the first 5 lessons. The beautiful thing about this is that you will get ample time to know how much interest the child really has in learning piano. Thus, one can decide whether to continue with it, without having to spend any money in advance. The biggest bang for the buck is that by the end of Lesson 5, the kid will have a firm grasp on the timing of the note, reading sheet music and be well on the way to absorb immediately from a live teacher.

Here are some things that worked well for us:

- Make sure that the parent who teaches is always at least a Lesson ahead of the child. The fact that the parent had to practice just as much made the child realize the need for practice and patience while at it.

- At the end of Lesson 5, we could sense the child’s interest and so we upgraded to the Yamaha P65 Digital Piano (current version - Yamaha P45) from the Casio CTK-515 keyboard (current version - Casio CTK-2400). This was a very rewarding experience for the child as it was well and truly earned. We felt good too.

- At the after-school day care potluck party, our kid played one of the songs from Lesson 5 and the appreciation from the parents who attended the program made us all especially proud.

- Last but not the least, Lisa gives excellent support for you and provides an immediate response. Her commitment for the program to be successful is noteworthy.

Note: Now, there are several such programs offered online. Check them out to decide on the best option. In certain situations, self-teaching might also work out.




Related Posts:


1. Portable Digital Pianos - A Comparative Review.
2. Non Portable (Home) Digital Pianos - A Comparative Review.
3. Digital Pianos (Yamaha, Casio, Roland, Kawai, Korg) - An introduction for Digital Piano Shoppers.
4. Portable Yamaha Digital Pianos - A Comparative Review.
5. Non Portable (Home) Yamaha Digital Pianos - A Comparative Review.
6. Yamaha Digital Pianos - An Introduction to Different Models.
7. Acoustic Piano (Yamaha M-460, Cable Nelson Yamaha CN-116, Kawai K-15, etc.) - Review, Best Values, Pricing, & Shopping Experience.
8. Yamaha P65 & the new Yamaha P45 Digital Piano Review.
9. Teach your kids Piano with learn piano online for free – well, almost!! (this post)


Last Updated: 04/2017.

Passive Income Opportunities - Part 1 - Network Marketing

The idea of passive income is intriguing because of its promise of creating something out of nothing. But, in reality, for all sorts of passive income, there are risks associated with them that need to be carefully assessed.

Our first attempt for passive income was a short-lived experience in the form of signing up for the one of the biggest network marketing companies in the US. We were hooked in by the promise of checks coming in as we sit back and relax after setting up a broad network under us. The risky part seemed to be setting up the network for which the company offered help in the form of weekly and sometimes impromptu “client” meetings. We immediately signed up for roughly $100 for the materials. The materials came about a week later in the form of everyday household goods that we were expected to find a market for. At this time, we panicked a little trying to figure out how to hook in people to sell the goods to. Not to worry, our friend who signed us up offered all kinds of help and invited us to her place for a presentation. The presentation went well – the talk was focused on how good & competitive the products are, interspersed with information about the presenter’s lavish lifestyle made possible by the passive incomes realized through this. Another week was spent trying to figure out how to hook up people into the system. Another presentation followed - this time by someone higher in the network. The presentation was a complete disappointment. It was pretty much the same content as the first one with the only difference being the stylistic aspects. What put us down more than the boring content was the fact that the rest of the people listening to it were behaving as though what they were hearing was the biggest thing since sliced bread (classic cult behavior), even though more than half of the audience was in attendance for the first presentation we attended as well. To summarize, with some discomfort with our friend, we were able to wiggle out of the deal. What did we learn from this experience? – First, these types of deals are not for everyone, especially people with minimal experience in marketing & selling. Second, the benefits are fairly back ended in the sense that a lot of time & effort needs to be spent initially to start enjoying benefits – time working families may not have!


Related Posts:

1. Exiting the Rat Race - Definition.
2. Rat Race Exit Strategies. 
3. Passive Income - Part 1 - Network Marketing.
4. Passive Income - Part 2 - Royalties. 
5. Passive Income - Part 3 - Rental Income. 
6. Passive Income - Part 4 - Dividends.
7. Passive Income - Part 5 - Pension Plans. 
8. Passive Income - Part 6 - Employer Plans. 
9. Strategies to Beat Inflation.
10. Strategies to Reduce Expenses.
11. Frugal Living - A Definition to go by. 

Last Updated: 01/2015.

Great America Santa Clara - Review/Rating

Great America was a somewhat different experience compared to the Santa Cruz Beach Boardwalk. Specifically, the number of rides is much larger and a little bit more crowded. Parking is $15 ($18 for preferred parking). The basic ticket pricing is $49.95 although there are season passes and several options that can reduce price-per-visit significantly. The pricing is discounted in the following scenarios – a) for ages 3-61 AND 48"and under, ages 62+, the pricing is $29.95.Ie, if you are aged 3-61, but you come in at 4’ or less, you quality for the lower price, and b) if you buy online, there is a savings of $13 for the higher priced ticket, but none for the lower priced ticket – ie, $36.95 for ages 3-61 AND 48" and taller & 29.95 for ages 3-61 AND 48"and under, ages 62+. I guess the logic is that if you are under 48” inches, there are several rides, you cannot go in due to height restrictions. But, even that scheme can be fairly unfair as there is not much of a discount for kids that come in under 46” – independent of your age, if you come in under 46”, there are several more rides you cannot go in.

The rides were fairly enjoyable and the lines were not that long. We did almost all the rides rated 4 or under in the 6+ hours we were there. We also saw a half-hour magic show by Ed Alonzo, which everyone in the family enjoyed – it was a good break from the hectic atmosphere in the rest of the park.

As is the case in most such parks across the country, purchasing food/drinks/snacks inside the park is horrendously expensive and you are not allowed to bring in food & drinks from the outside. Cotton Candy’s were $3.50 (small) and the pricing was in that range or higher for other snacks or soft drinks. The one cafeteria we went in had the pricing menu hidden away in the upper side corner. This results in sticker shock at the counter – we saw a family of 4 ordering 2 plates of chicken & fries, 2 slices of pizza, and some soft drinks and the check came to ~$70 – the poor guy asked again to verify, then looked across the plates in front just to make sure there wasn’t any mistake, then offered up the credit card. A somewhat better deal seemed to be the all-you-can-eat barbecue, which is $13.95 for adults and $8.95 for kids. Compared to the food pricing, the gift shops seemed far better as far as pricing. They had several themed t-shirts priced at $5 a piece and many shops had aisles, which offered up to 75% discount.

Overall, a very enjoyable experience – we would go again next year, if time allows. The park closes for Winter in early November and reopens late March.


Related Posts:

1. Wonderla, Kochi
2. Six Flags Discovery Kingdom, Vallejo
3. Great America Santa Clara
4. Santa Cruz Beach Boardwalk
5. Trip Report to Genting

Last Updated: 10/2015. 

Local.com - Part 3 - Investment Outlook

Local.com is expected to generate positive cash flow next year. It just raised $13 Million to raise the total cash hoard to around $20 Million. So, it looks like the company has plenty of cash to stay around assuming the cash requirements do not drastically increase going forward and that the existing businesses continues to provide slow growth. Further, the existing business is projected to bring in revenue close to $30 Million next year. It is growing at a relatively slow rate but at less than 2 times revenue the valuation seems reasonable.

Since the recent excitement is because of IP, it makes sense to look at other small cap companies for whom licensing IP is a business strategy. Two small cap technology companies that come to mind are SCO Group (SCOX) & Immersion Corporation (IMMR). These were chosen because there is wide difference in the IP held by these two. Immersion has a fairly large patent portfolio. They have been successful in generating a good portion of their revenue from IP (see royaties & licenses line under Revenue). SCO Group on the other hand has been unsuccessful in generating significant revenue from IP and from their press releases it is unclear what they actually own. To summarize, even though SCO Group made a lot of noise with little substance, ultimately the stock went down reflecting its business prospects. Immersion on the other hand has seen a steady rise in its stock price. The one thing these two stocks had in common between is the fact that they both saw wild fluctuations in price to both sides over the years as the general public speculated on the value of their IP.

So, what does all this mean to Local.com investors and speculators? – Valuing patents is extremely hard to do. There is every chance that trading in Local.com would continue to follow an up-and-down pattern for an extended period of time – so trading in and out could be a profitable strategy.
- Local.com is valued in the mid-range of small cap companies on an enterprise value to revenue basis. Since the valuation is reasonable, holding the stock long term as part of a strategy to own a small portion of ones portfolio in a speculative but value based holding is logical as well!

Local.com Analysis:

1. Part 1 - A Patent Speculation Play.
2. Part 2 - 411 Patent Details.
3. Part 3 - Investment Outlook.
4. Part 4 - Analysis Of Another Speculative Upturn.

Local.com - Part 2 - 411 Patent Details

The second patent awarded to Local.com in a week was announced in the July 2nd press release for U.S. Patent Number 7,200,413 for Ad-Supported 411 Local Search Model. The interesting thing about that announcement was that the press didn’t seem nearly as excited as after the first announcement. Chairman & CEO Heath Clarke appeared more bullish on this as he prodded free 411 providers to license the technology.

Given the lack of coverage, we are left with the patent text and other public information to help us gauge whether the patent will help the company generate more revenue. Looking at the patent text, there are a couple of things that are noteworthy: a) the description starts with a Notice of Copyright and Trade Press. One can only guess at the reasons behind the company adding this clause for this patent while not doing it for the local index search patent. It may have to do with the company wishing to use some of the drawings and/or other content as a way of identifying their product in the future, and b) there is only 1 claim in the patent. If there were other claims in the original filing, they may have been rejected by the patent examiner. This could imply that the company may originally have attempted to make this patent apply in an even more general situation.

The patent claim text follows:

1. A method of sharing directory listings via a wireless messaging system in a distributed environment using a computer network comprising: (a) Maintaining a database including a plurality of directory listings, wherein each listing is associated with a referral phone number, at least one search term and a dynamic, controllable index; (b) Receiving a directory assistance request in the form of a keyword from the customer; (c) Identifying the directory listings having keyword terms generating a match with the request; (d) Ordering the identified directory listings into a phone number result list in accordance with the values of some controllable index for the identified directory listings; (e) Translating phone number result list into a format that is compatible with a wireless messaging standard; (f) Transmitting the translated result list through a wireless messaging system back to the requesting customer's wireless messaging device; (g) Enabling the receiving message device to automatically callback the directory listing provider requesting a telephone referral; (i) Receiving the message phone callback and authenticating the caller; (j) Correlating the callback to a previous request and result set; (k) Transferring the callback phone call to the corresponding telephone referral number; (l) Initiating a business transaction to generate billing and revenue transactions for the paid referral.

It describes a free 411-service model that uses ad-supported keyword based business matching. We will assume that the technology itself is valid IP, since there hasn’t been any press releases or other material from the media that questions the validity. Let us proceed to look at the value a business might see in licensing the technology. Currently, the 411 businesses make money at both ends of the deal. Ie, on the one side, businesses have to pay money to get listed and at the other side 411 customers pay a fee for the service. The new technology touts the use of a fully ad-supported revenue model by allowing a much more flexible business search mechanism using keywords. It should benefit the consumer since they get to use a free flexible system as opposed to a rigid fee based system. It should also benefit the service provider since they get to make money based on what potential customers are willing to pay for choice keywords as opposed to fixed revenue based on the business listing.

One other area we have to look at is the competitive landscape. This is a more difficult area to look at. There are products in place that have very similar functionality and so the added value is very tough to gauge: a) Internet search provides similar functionality and has the added advantage that one gets access to all service providers –with the proliferation of wireless internet, it should be regarded as very viable competitive threat, and b) GPS devices have similar functionality and have the added advantage that for local searches it knows your location already.

So, what can be said of the value of the patent? - PDA’s with both GPS and wireless Internet functionality seems to provide a far superior alternative to a search variant of the old 411 business and so developing a new business model may not be that easy to do. However, existing 411 businesses may see value in licensing the technology as an upgrade to their existing businesses.

Local.com Analysis:

1. Part 1 - A Patent Speculation Play.
2. Part 2 - 411 Patent Details.
3. Part 3 - Investment Outlook.
4. Part 4 - Analysis Of Another Speculative Upturn.

Local.com - Part 1 - A Patent Speculation Play

The firm got Nasdaq listing 10/2004 when it raised $22 million at $8/share. The listing enjoyed early success with the stock climbing steadily to $30/share in one month. This was a ride on the back of press releases such as the one about licensing “Local Direct(TM) search and advertising platform to Internet Yellow Pages (IYP) provider, MYePages LLC”. By 5/2005, the stock was down at $5. By 6/2007, the stock was hovering around $4 and the average volume 100K down from 1 million in 2005. Then excitement began with 2 patent announcements.

The first being the June 25 press release for U.S. Patent Number 7,231,405 For Location-Based Search . This immediately attracted a positive blog report (Could Local.com Become the Local Search Industry's Qualcomm?) from John Gilliam (a long – disclosed in the article) and a rebuttal from Marty Himmelstein, a local search specialized tech guy who founded Long Hill consulting. John’s published profile indicates that he has a law background and is the manager at Point Clear Strategic capital. Long Hill consulting web-site indicates that the company may have competitive technology. So, the value of these points of view are limited by the fact that one way or the other each of them has personal benefits by portraying Local.com’s prospects in a certain way. Below is an attempt at what can be derived from the public info. The basic claim of this invention is as follows (the spelling/grammar problems are as is from the patent text!!??? ) -

A method for geographically indexing information, the method comprising: identifying a geocoded web page of a web site; identifying a aeocode contained within content of the geocoded web page of the web site, the geocode indicating a physical location of an entity associated with the web site; identifying at least one geocodable web page of the web site, the geocodable web page does not contain the geocode; indexing content of the geocoded web page and content of the at least one geocodable web page, the indexing including associating the geocode contained within content of the geocoded web page to the indexed content of the geocoded web page and to indexed content of the at least one geocodable web page to allow geographical searching of the content of the geocoded web page and the at least one geocodable web page relative to the geocode

There are 20 other claims based on this one. Reading this text, it seems the claim is very broad but involves several steps. Each of the steps can be done many ways and these claims attempt to pin down the ways. Marty’s rebuttal is based on two basic arguments: a) prior art from Microsoft that has similar language and b) some of these steps are either inefficient or there is prior art that does it better. He backs up his arguments with technical points. But for an investor what matters is whether local.com can make money out of the invention profitably. To that end, the prior art citing does not seem especially worrying, given the patent examiner cited the work already – in fact, most all patents cites prior art on which portions of the work is based on. The rebuttal pointing out the inefficiencies are however somewhat worrying. What that means is that a competitor by doing one of the steps more efficiently could side step the patent and also have a more functional product.

John’s article speculates on the similarities of the business strategies that may exist between successful web businesses that eventually got acquired for a lot of money such as Overture. The title is a good giveaway on the general tone, given Qualcomm developed a patent strategy after being a fairly successful company for many years. Further, Local.com has not explicitly stated anywhere that their business strategy is focused on defending their IP. So, most of the article can be termed as overly optimistic speculative musings of a fellow blogger.

Patent litigation/settlement profits are a long shot, in general are a long shot. Local.com might not use that as a strategy, given there are lot of companies using similar technology that may have sidestepped the claims in the patent. Whether licensing royalties will materialize based on this invention depends on time to market issues rather than how good the invention really is. If partners/competitors see immediate benefit in licensing the technology as opposed to developing similar technology from scratch, then there is a chance that they will see some material benefit. As an investor/speculator, we will have to wait and see the company’s cues…

Local.com Analysis:

1. Part 1 - A Patent Speculation Play.
2. Part 2 - 411 Patent Details.
3. Part 3 - Investment Outlook.
4. Part 4 - Analysis Of Another Speculative Upturn.

Santa Cruz Beach Boardwalk - Review/Rating

We visited the park and it was a truly great experience. We enjoyed the sweeping views when driving down Highway 17 to cross the mountain past Scotts Valley into the beach town.

The parking opposite the park is $12 (holidays $15). We loved the fact that you can walk right into the park without purchasing a ticket. Only the rides cost money. And, they have a variety of purchase options for tickets. Season Passes are $74.95 (plus tax). All-day rides & MyBoardWalk Cards (rechargeable in flexible amounts) are also available. On the average rides are 4 points ($4) with the smaller rides 3 points ($3) and the most popular (and scary) ones 6 points ($6). The snack prices at the stalls seemed relatively reasonable when compared to other parks.

The best part of the rides was the fact that the lines were very manageable with the most popular ones having a 10-minute wait. The most enjoyable ride was the Logger’s Revenge with its big-splashing finale.


Related Posts:

1. Wonderla, Kochi
2. Six Flags Discovery Kingdom, Vallejo
3. Great America Santa Clara
4. Santa Cruz Beach Boardwalk
5. Trip Report to Genting

Last Updated: 10/2015. 

Rat Race Exit Strategies

There are 3 main practices to use when aiming to exit the rat race as quickly as possible:

Develop avenues of passive income – these include such income streams as dividends from stock or mutual fund investments, royalties, rental income, pension plans & variants, etc. The central idea here is that you do not have to spent energy to realize the income.

Develop strategies to protect asset-base against inflation – the main idea here is to invest in areas were the returns are proven to beat inflation over time.

Minimize expenses – these include planning to own assets that you use on a daily basis (as opposed to renting them), minimizing subscription style expenses (taxes?) of all kinds, etc.

The next series of articles go into details of each of these areas.

Related Posts:

1. Exiting the Rat Race - Definition.
2. Rat Race Exit Strategies. 
3. Passive Income - Part 1 - Network Marketing.
4. Passive Income - Part 2 - Royalties. 
5. Passive Income - Part 3 - Rental Income. 
6. Passive Income - Part 4 - Dividends.
7. Passive Income - Part 5 - Pension Plans. 
8. Passive Income - Part 6 - Employer Plans. 
9. Strategies to Beat Inflation.
10. Strategies to Reduce Expenses.
11. Frugal Living - A Definition to go by. 

Last Updated: 01/2015.

Thoughts on investing the remaining 7% cash

The following are the stocks in our radar:

• Patni Computers (PTI): This looks like an under-valued Indian outsourcer. About 25% down from the peak as a result of correction in the Indian market. Also, some speculation about private equity firms taking a controlling stake seems to be dyeing. 15% grower trading at a PE of about 14. Click for our detailed analysis of PTI,
• Akamai (AKAM): Previous wall-street darling down 40% from the peak as a result of concerns about growth, competition, and margin. 30% grower trading at a PE of about 25,
• Local.com (LOCM): A very speculative play given the very low market cap. The main idea here is that eventually it will get bought out a premium. Not very expensively priced - $45 million enterprise value, $60 million next years projected revenue, roughly $15 million cash with the burn rate expected to come down. Has patents listed in their web-site that may have some value. Click for our detailed analysis of LOCM, and
• Genentech (DNA): About 25% down from the peak. Do not know the reason why it came down that much over the last 2 years. Expected growth rate is still in the mid-20’s.

In general, a lot of opportunities have been missed recently because of a lack of liquidity based on a determination to minimize trading. AAPL & MCO at ~52, ISRG at ~90, NVT at ~33, CVNS at ~15, KYPH at ~44, PFACP at ~6, etc. comes to mind. However, the other extreme of trading constantly as was done in the 1998-2000 timeframe was not good either. So, a middle ground should be what needs to be done…

Exiting the Rat Race - Definition

The idea is to be able to quit the day jobs and be able to do whatever one wants while setting up the finances so that the cash flow is perpetually positive. The posts under the topic discuss strategies to achieve this:

1. Exiting the Rat Race - Definition.
2. Rat Race Exit Strategies. 
3. Passive Income - Part 1 - Network Marketing.
4. Passive Income - Part 2 - Royalties. 
5. Passive Income - Part 3 - Rental Income. 
6. Passive Income - Part 4 - Dividends.
7. Passive Income - Part 5 - Pension Plans. 
8. Passive Income - Part 6 - Employer Plans. 
9. Strategies to Beat Inflation.
10. Strategies to Reduce Expenses.
11. Frugal Living - A Definition to go by. 

Last Updated: 01/2015.