Advanced: recognizing inside(insight) information

Taking advantage of information gained from an inside insight is totally legal.

Two examples:

1. About 20 years ago, IFO discovered a delicious vegetarian burger made in a city near her home. At this time the home food delivery business was trying to re-establish itself. IFO asked her food guy to get some of those burgers.

The following week, he came back with fewer than she had asked for, explaining, “The burgers are going out the back door faster than they can make them.”*

Hmmmm. She got an assignment to interview the company founder. Next, she learned the company was going to do an IPO (initial public offering of stock). She bought all the stock she could afford. The price went up and up.

A few years later, she read that the CEO/founder had sold most of his stock.* Alarmed, she sold all her stock. Within just a few years the company imploded.

2. About three years ago, editors at one of her newspaper clients urged reporters to get a Flip camera and learn to make video news clips. IFO held off on the purchase until she had a chance to ask the paper’s photo editor about it.

“Don’t get the Flip!” he said. “Those cameras are breaking down and not working.” *

Now, IFO owned Cisco stock, but she didn’t notice when they bought Flip’s parent company in 2009 for almost $600 million!! But fed up with the company’s huge stash of cash being used for acquisitions, not dividends, she had sold the company at about the same time. Besides the company hardly seemed to do any R&D and its annual reports listed many writedowns for previous acquisitions.

That proved to be the case with Flip. Two days ago, Cisco announced it was closing down the Flip unit. One online techie publication bemoaned the move, calling Cisco “idiots,” one of IFO’s favorite evaluative nouns.

A Forbes blog had a different take on the move.

This is how deep into the weeds you have to get to get meaningful information.

* = insight information, potentially actionable.


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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