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Author: cocomurph1 Big gold star, 5000 posts Old School Fool Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46826  
Subject: Re: TMF's Future-Could Less Be More? Date: 10/10/2005 1:52 PM
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Sorry, missah! I hadn't thought of that!

Here is the post:


Hi All!


Let me get one thing straight upfront- I subscribe to four TMF Newsletters ( HG, SA, II and IV ) and am very satisfied that I get more than my money's worth for each and every one.

And now, the inevitable, “ however”..., I am convinced that the price/value relationship of these combined services, while still VERY acceptable, may have slipped a bit...and has the potential to go down as time progresses, unless some changes are made. Let me tell you why.

In any business there are inevitable tradeoffs, many of which come down to the choice between fewer better quality products/decisions/recommendations or a greater number of lower quality aforementioned outputs. Every organization and person has finite resources of time and money. Yes, these things can be increased over time, but rarely at the rate required by the pure math of TMF's “mandatory” stock pick load.

In the beginning, there was SA…and it was good! Two picks per month; a re-rec now and then…say an average of 10 picks/year. SA's success begot HG…..and it also was good ( and relatively non-duplicative given it's differing cap size focus from SA )….two more picks/month; a re-rec or SA cross over now and then……say 10 more new picks per year. Then add in Micro cap bonus picks….say 10 more/year ( we won't count “Watchlist” picks because they are part of HG pick due diligence ).

Now, let's add in II and IV…both great and relatively non-overlapping services….say a net of 10 more new picks/year for each. Then the last to join the stable, Dave's new baby- RB…10 more net new picks/year.

So all that makes for a rough yearly TMF net “new pickload” of about 50/year, plus Micros and Watchlist work. What's to worry? After all, in a universe of some 9000 stocks, plus international selection, the ocean is huge, right?
Yes, the ocean IS huge, but a new pick is sort of like infant…it needs care and attention…and sometimes even direct intervention ( can you say “FLML” or “TKTX”? ).

Now, I'm going to go out on the proverbial limb here and estimate that the amount of time spent on the average “old” pick per year for things like quarterly results reviews, special reports and general pick “maintenance” is AT LEAST equal to the amount of time spent on making a new pick Further, I'll estimate that about 5 old picks per year are sold/merged/duplicated. And since all these things ( making new picks and the care and feeding of the older ones ) take time….human time…..and most important of all, at least some “expert” or “top level talent” human time….if they are going to continue to be done with at least equal-to-the-past quality of thought….then TMF is facing, or will shortly face, the inevitable tradeoff off “quality versus quantity.”

There are currently ( as of October 6 ) about 169 total TMF active “official” picks from the four newsletters I get ( not counting Micro, Watchlist or the Annual Issue picks)…give or take one or two due to my laziness to count these to a gnat's eyelash. Add in my guesstimate for RB of 22, for a grand active TMF pick total of 191.

Here are a few more numbers:

CUMULATIVE YEARLY TMF PICKLOAD FROM PRESENT LOAD ( 10/05) Year: Current 1 2 3 4 5 New Picks* 50 50 50 50 50 Less Deletions** (5) (6) (7) (8) (9) OP Maint.*** 191 191 236 280 323 365TOTAL 191 236 280 323 365 406

*Does NOT include any time/workload for new Micro, Watchlist or the Annual Issue picks.
**Deletions for sale, mergers and cross-over picks. Assumes some growth in deletions due to a larger universe of picks
*** “Old Pick” Maintenance- cume total net of additions and deletions...does not include ANY maintenance for Micros, Watchlist or the Annual issue picks


OK, so the TMF “pickload” is going to more than double from it's current level in about five years...about 17-18% compounded per year...
What's the big deal? As TMF has upped their “pickload” via newsletter additions in the past, they have dedicated resources allocated for the additions ( Mathew Emmert, and Philip Durell ). Plus, Tom and Dave have a balanced load ( they share SA, and have HG and RB individually….plus, Tom has added Bill Mann to HG ). And don't forget that TMF has added numerous talented Board strollers like TMF1000, TMFCop, TMFMillerTime, TMFRoz, TMFKitKat and many more.
They obviously recognize the resource issue and a re taking action. What's the problem, Murph?

Well, for every individual there are a finite number of hours in the day; and there are only a limited number of talents around of the quality of Tom and Dave, Mathew, Philip, Bill and the rest of the TMF crew. Yes, Tom, Dave, Mathew and Philip can set the stock pick criteria and others can do all the initial screening driven by numbers. But what has TMF's history shown is one of the most critical factors in picking/monitoring a stock? Quality of management! Now, how many TMF'ers are qualified to make really in-depth judgments on this VERY intangible, but critical variable?

Further, it's one thing to read a 10-k or 10-Q line by line, but it's quite another to recognize what is hidden there that is of great importance versus what is not. That skill is one that can be taught over time to a certain degree, but certainly can not be “formularized” like an initial stock picking screen, since every company has it's unique nuances.

These two areas--evaluating management and deciphering the importance of financial nuances-- (among others, IMHO) require top level talent…..and that's hard to grow to the tune of 18% /year. So, I would hypothesize a gradually declining level of involvement by the top players per stock pick over time. That will naturally lead to more oversights, errors and a lowering of the “quality” of the TMF “product”. As possible evidence of this top-talent overload effect, I would point to the possible investigatory oversights related to FLML's and MPX's management before these picks were made.

There are other examples, IMHO, but the point of this post is NOT to list problems or to debate whether or not the issues with FLML's arrogant founder or MPX's 20% off-the-top agreements were indeed initial oversights….. but rather to offer a partial solution to the probable “growing pains” of what I consider the best investment resource on this planet ( TMF and the entire TMF Community ).

So, back to the inevitable tradeoff between quality and quantity that every organization faces. I am a very firm believer that in the arena of investing/stock picks, LESS IS MORE!. What is the rationale for two new picks/month at this point in TMF's evolution? I understand it for the early days of each newsletter…..the stable of investment choices was, by definition, small. And yes, I know that re-rec's take some of the load away, but we already accounted for that in the chart above.

Wouldn't we rather have one better quality pick/month/newsletter than two of lesser quality? I know I sure would….especially against a backdrop stable of 191 current active picks, most of whom present an ever-changing investment story and opportunity to buy/sell….and many of which are often better investments ( IMHO ) than current picks. Maybe an exception is made on months with re-rec's and they are paired with a new pick, but only if one really warrants it…and NEVER force the issue to meet a number, like so many companies do when trying to please “the Street” for quarterly numbers.

So, here is one vote for all five TMF services going to one new pick per month. One pick that has the very best focus on it that TMF can muster. One pick that will up the odds of long-term investment success for TMF subscribers, and thus, TMF itself. Those who will decry this action will tend to be those with shorter-term investment approaches, traders, etc. There is absolutely nothing wrong with those who want to “play the pop” or whatever shorter-term strategy….but is that who TMF is geared toward?

Tom has talked about most good business's need to “ FOCUS, FOCUS, FOCUS!!”

I hardily agree!

It may well be time for TMF to do more of the same.

With absolutely the greatest respect for Tom, Dave, Mathew, Philip, Bill and the entire TMF crew and Community….and the products they have created,

Murph
( who really believes that in many areas of life, less is more )






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