Do you play the lottery? Spend a dollar on a ticket and buy hope and the chance to win much more. Millionaires have been made that way. Most millionaires got there through inheritance, hard work, or investing. Lottery tickets aren’t investments. They are wild speculation. We play because wild speculation has worked for others and may work for us. Many stocks are investments, but many are also speculations, and some are wild speculations; but, either by chance, plan, or hope I’ve found myself a shareholder in more than a few. Especially when the price is down around a dollar, I consider them my lottery ticket stocks.
When I invest I try to use my advantages against the weaknesses of the massive financial institutions. They steer clear of companies that are too small (worth less than a billion dollars), too remote (interesting how researchers in New York, New York, overlook the left coast), or too difficult to understand (technology can be intimidating to someone with a finance background). I get into the details of my investing style a bit more in my book (Dream. Invest. Live.), but there’s a need for another level of detail, which is what inspired this blog. Today’s post is about one of those companies (Microvision), one of those stocks (MVIS), one of my advantages: the ability and willingness to attend stockholders meetings by investing in local companies, and a balance of hope and caution.
Microvision is a story company. If they succeed they’ll change the world. Their innovative display technology allows a cell phone to project screen images across entire walls – if the room is dark enough. Just like with a flashlight, they project a cone of light that eventually noticeably dims with distance or ambient light. Because they use lasers the image is always in focus, which means the device can be shown on any surface (handy in a mobile device) and can be moved around (handy in game controllers). Computers and televisions are obvious markets (I already use mine, a ShowWX, to watch DVDs), but if cheap enough they can also change dashboards, cameras, cell phones, game controllers, etc. There is great potential. Check out their web site for more, but the stock discussion boards reach farther into amazing product possibilities and potential profits. Go there and you’ll also read about the chance that they might run out of money, lose to larger or more innovative competitors, or encounter some fatal technological flaw.
That’s been the story for over a decade. A friend asked me if they were a one or a ten, on a scale of ten. I said yes. They’re like a quantum company, both possibilities existing simultaneously waiting to collapse to one reality with no distinction in the present.
Welcome to the 2011 Microvision Annual Meeting of Stockholders, which should have the acronym AMS, but everyone seems to use ASM. They’re a local company and I’ve attended almost every meeting since I bought the stock in 2000. One of my traditions is to attend, take notes, and post them on various discussion boards. Head over to The Motley Fool, Investor Village, and Silicon Investor if you want to read my notes. I think a greater value is being able to read the notes from other attendees, as well as the questions from those who couldn’t attend.
Since I bought the stock it’s gone from $35, up to $65, and eventually down to where it closed on Friday, $1.13, slightly more than the price of a lottery ticket. Estimates of MVIS’s value range from $0 to above $100. The most optimistic guesstimates range into the hundreds of dollars.
MVIS is not the only stock with such high and low potential. They are seductive stocks. For the price of a pair of shoes you can buy 100 shares of stock, depending on your taste in shoes. That does not mean it is the best way to invest $100. But $1 spent on a lottery ticket is money well spent if you win the jackpot. And it shouldn’t be mistaken for investing. It is speculating, spending money on hope. You can only lose $1, which is fine if you only spend $1, but if you spend $1 ten thousand times you can lose $10,000. Of course, if a $1 stock becomes worth $100, then 10,000 shares becomes a million dollars. Nice return, but only if you can afford to lose that $10,000.
A few years ago some friends heard about some of my lottery stocks. The others were seen to be much more expensive, as high as $4. MVIS looked cheaper and many bought shares. One of those “expensive” stocks was DNDN, which went from a low of $2.60 (while MVIS was < $1) to a high of about $55, and with estimates in the hundreds (Is Dendreon a $360 stock, Or Is That Too Low?). I think we own over 100,000 shares of MVIS. If we’d bought 50,000 shares of DNDN at $2.40 for $120,000 (and, no, we don’t coordinate any of this) a twenty-fold increase would result in $2,400,000.
It is easy to be seduced by the potential of such stocks. Little companies do take over their world on occasion, but most do not. Most fade away or are absorbed via mergers and acquisitions.
I own this lottery ticket because I thought they’d have a product and a profit within a few years. In 2000 The Seattle Times ran an article suggesting that Microvision might be profitable in 2003 or 2004. I bought in at about $36. Every year the estimate has been profitability in 2-3 years. The topic wasn’t even raised this year. Too many investors, some with more tenure than me, have become inured to postponed hopes. Many have sold and left, and may be waiting for quantifiable, credible news. One group even has formed a private discussion board that is more support group than stock analysis, yet it continues to have members because of the possibility of incredible success.
Those 100,000 shares of MVIS may someday be worth $10,000,000. It is easier to become emotionally engaged with that possibility rather than the possibility that those 100,000 shares will be worth nearly nothing except a good story. Rationally everyone seems to understand the downside, but emotions aren’t required to listen to reason.
I tell this cautionary tale because I’ve lived it many times. Look in my book for the data. Sometimes the investment has succeeded. Many more times it has not. The successes are fewer but exceed the losses because the losses can’t exceed -100%. The gains can be much higher.
If you haven’t figured out by now, allow me to emphasize the point that I am more tolerant of risk than many others. I am also passionate about some of the potentials. Dramatically reduce the need to build, package, ship, and make room for 100 inch monitors? Great! Dendreon can retrain a body’s immune system to fight cancer with limited side effects? Wonderful! American Superconductor can do for power what fiber optics did for data? Marvelous! But I’d probably buy into them if they were $100 stocks in companies that had 1/100th as many shares.
But I’ll also admit to buying lottery tickets. They’re only $1. What do I have to lose?