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No. of Recommendations: 21
I'm a strong believer in LTBH and my approach to portfolio management is to identify and acquire companies that have both strong growth potential and solid management teams. In particular, my primary focus is on the management team simply because I have spent most of my consulting career in evaluating major projects for private and public groups and organizations. It is my experience that without a strong, focused management group with a clear management philosophy, the long term success of a project is in doubt. Everything else is secondary, including short term growth prospects.

For what its worth I'm very long on NT. In fact NT is the largest single holding in my portfolio, and growing. Buying NT was not a knee jerk reaction to stockmarket turmoil, rather, it was the final result of a long term review (several months) of the firm's market performance, acquistion strategy and management approach. For a firm like NT, market performance review is a no brainer, all thats necessary is to keep tabs on the firm's press releases and financials. Aquisitions are a different kettle of fish; unless you are highly knowledgeable regarding the specific technology involved there is no way that you can reliably assess the desirability of a given acquisition - simply put, you are relying on the expertice of your management group who, by buying into the company, you are implicitly expressing your confidence in.

Assessing management is not an easy exercise but it's not impossible either. For me, the first priority is a "single" leader who has the capacity to focus the company onto a (subjectively) narrow range of activity. The second priority is his willingness to surround himself with a strong management and technical group who have the ability to carry through a focused program of growth. The third priority is a management group with the confidence in itself to acquire new leading edge companies while having the self confidence to divest the company of areas of activity that are marginal, no longer technical leaders, or, while viable and technological leaders, no longer fall within the game plan of the organization.

Clearly, NT meets all of these criteria. A couple of days ago I had the opportunity to sit in on a presentation by Mr. Shakoor Dean of Nortel to a group of Canadian foreign service officers. I would place Mr. Dean in the middle management of Nt. His discussion dealt with the process of mergers, acquisitions and divestitures within his company. Without going into specifics I will simply note that the process described by Mr. Dean is based on the careful and delicate integration or removal of the entity into or out of the NT corporate culture, while retaining the internal cohesion of that entity. To me, the process described by Mr. Dean is a good indicator of management philosophy within the company as a whole, and of which I heartily approve. Finally, on this point, if Mr. Dean is an example of the calibre of young people in middle management within the company, then we are going to be in good hands over the long term.

Finally, to a long term investor the present turmoil in the market is of no relevance except possibly as a buying opportunity (yup, I certainly did). The exception to this would be if the company was in such serious difficulty that its long term viability and/or intrinsic value was in doubt. Certainly this is not the case with NT. For a speculative player, this has been a wonderful opportunity, and I hope you have all done well - I just wish I had your nerve and brass. For those of you who are panicing, and there are a few as the board clearly shows, relax, or if you can't, then perhaps this isn't your game.

One last point, there are clearly times in one's investment career when panic is the only appropriate responce. A case in point, a few days ago I awoke with a horrible sinking feeling, turned to my wife and declared "Oh, god, honey, I've forgot to get you a birthday gift...." Came the voice from under the blankets - "You idiot, your five days early.

Now you panic.


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