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Confessions of a Newsletter Writer
By William Parmenter, editor
Nate Pile talked on Confessions of a Newsletter Writer: What 22 Years in the Industry Have Taught Me at the April 16meeting of the Los Angeles chapter of the AAII at the SkirballCenter.
Pile opened his presentation by recounting his biography. He graduated from U.C. Berkeley and worked eight years as a junior high school math teacher.
He got obsessed with the stock market, and read Peter Lynch’s One Up on Wall Street. Pile got interested in biotechnology and worked on the Medical Technology Stock Letter for six years.It was around 1987 and Pile loved the idea of doubling his money every five or six months.
He worked on the AgBiotech Stock Letter for 18 months, writing most of it. He worked in corporate finance in San Francisco for four months. After that he started Nate’s Notes in February, 1995, which he has been publishing ever since.
The newsletter focuses on long-term high tech and bio tech growth stocks. Each issue is eight pages. Stocks are divided into core and non-core stocks. Pile trades only once per month. One of his long-term stocks, Apple, has been a core holding since 1998.
When he started, he focused on the microcap arena. It was a very difficult area in which to make money, because mostly the stocks just moved sideways. Pile learned that stocks need institutional backing (i.e. hedge funds, analysts, mutual funds or ETFs) to move up. With institutional backing stocks hit a critical mass and their price appreciates.
Pile’s results from 1997 to now:
+648.6 percent for his model portfolio
+1,453.9 percent for his aggressive portfolio
Versus:
+66.4 percent for the DJIA
+74.4 percent for NASDAQ
Year to date he is up 4.7 percent.
The newsletter has a couple of hundred subscribers. Mostly the newsletter is delivered by email (due to the cost of printing). By going to you can read the February issue for free.
The newsletter’s approach is to look for biotech and high tech companies that have long-term compelling growth stories. The market cap needs to be at least $250 million dollars (based on share price times the number of outstanding shares).
Stocks are typically volatile, so he focuses on what he knows. Pile tries to avoid the cheaper stocks that are becoming ever cheaper. He has learned to look for stocks that are in an uptrend. His portfolio consists of an
Table of ContentsConfessions of a Newsletter Writer…...Nate Pile……..p.1
Gold and Silver Shares Act II…Michael McGowan..…p.3
Education Nuggets………..Don Gimpel………………p.5
average of 18 to 22 stocks, aiming at reasonable diversification. Pile does not look at dividends when making stock selections.
Pile noted that monthly newsletters sent through the mail are in decline. Everyone is moving to on-line newsletters. Daily and weekly updates are in vogue now.
There are some things Pile does not do. One thing he avoids is looking at P/E ratios, because it is too easy for small companies to cheat.He does not use numerical technical analysis (i.e. moving averages). He is more interested in the shape of the chart pattern. He does not often talk to management.
Pile is concerned that the stock market’s straight line march up of the last few months, driven by computer buying, will result in a flash crash and a hard drive down. Computer trading could lead to a strong unloading of risk. He noted that the market overshoots on both the upside and the downside.
Probably the market will move down after June, after Facebook goes public.
The only chart service that he uses is
Along the way Pile has learned some lessons. One is that he is not going to be right all the time. When he is not right, he has learned to sell. When he is right, he wants to stay right as long as possible. For example, he has been invested in Apple since 1998.
He looks for long-term winners. Pile wants to invest in quality stocks. One of his dictums is do your homework, and have confidence in your decision. He has found that the masses are never right.
The fear and greed cycle looks the same when it comes to chart patterns. He does not let other people talk him out of his investment decisions.
Pile has found that very rarely are the stock price and the fundamentals of a company in synchronization with one another. Stocks cycle between being overvalued and undervalued.
He has learned to base his position on what the market is actually doing, not on what he thinks the market should be doing.
Pile shared his top picks on stocks that he likes: Celgene (CELG) selling at $56.98.
Cubist (CBST), at $32.27.
Illumina (ILMN), at $67.59.
Affymetrix (AFFX), at $5.66
Hambrecht and Quest Life Sciences Fund (HQL) at $12.41. This is a closed end fund, a fund where dividends come into play.
He also likes: QID, (an ETF that goes opposite of the NASDAQ index by a factor of two), DBA, DBC and GLD. Pile follows the
Los AngelesCountyMeeting ScheduleWestside Computer Group – Don Gimpel, (310) . Veterans of Foreign Wars Memorial Bldg. Culver Blvd. and Overland Avenue, Culver City. The group will meet at 10:30 a.m., Saturday, June 4. Topic: TBA. The UltraFS 11 group will meet at 9 a.m. on the same day.
Pasadena Group– Will meet at 7 p.m.May 17, at Pasadena Main Library, in the David Wright Auditorium, at 285 E. Walnut St., Pasadena. (Meets third Tuesday of the month, except for August and December.) Topic TBA. Voluntary contribution of $2. Contact, Ivan Wong at (626) 446-2486, .
Mutual Fund Group – Meeting at 10:30 a.m., May 7 at the Craft Room of Memorial Park, 1401 Olympic Blvd, Santa Monica 90401. Don Gimpel, Ph.D., on How to Best Engineer Your Portfolio. Contact Gunter Hagen (310) 457-7404, . The meeting is free to the public
Stock Selection Group—Norm Langhout, (310) 391-6430, . Meeting at 7 p.m., April 27, Using IBD, CANSLIM stock selection method , at Fairview Library, 2101 Ocean Park Blvd., Santa Monica. The group meets the fourth Wednesday of the month.
Los Angeles Chapter, Skirball Center at 9 a.m, Sat. May 21, Trends and Outlook for the Global Economy and Capital Markets,by Frank Barbera.co-manager of Sierra Core Retirement Fund, and President of Sierra Investment Management; and Advanced Perspectives in Retirement Planning, by Somnath Basu, Ph.D., professor of finance at California Lutheran University.
Desert (Palm Springs area) Group Usually meets from 10 a.m. to noon, second Saturday of the month at Sunset View Club House, Sun City, PalmDesert. No meetings will be held until October, 2011. For more information, contact Patricia Gammino, . or at (760) 485-6161.
Option Special Interest Group, meets online on first and third Tuesday of the month at 7:30 p.m. Get instructions on how to participate at ; click on subgroups, and get information from the Options Special Interest Group. Group leader is Robert Morgan at .
Biotech index, BTX.
What is Pile buying in the biotech space?
They include: Nvidia (NVDA) selling at $18.71; and TriQuint (TQNT) at $11.82. In the consumer space, he likes: Apple (AAPL) at $324.60; and Walt Disney Corp (DIS) at $41.52.
Information on his buy selections were available in his on-line February newsletter, available at
on a complimentary basis. The February recommendations were: Celegene (CELG), buy l00 shares; Perry Ellis (PERY), buy 200 shares; Walt Disney (DIS), buy 100 shares; Affymetrix (AFFX), buy 1,000 shares.
To sign up for the newsletter go to the webside The usual price is $289 per year; the discounted price is $249.
Books that Pile recommended are: Peter Lynch, One Up on Wall Street, Philip A. Fisher, Common Stocks and Uncommon Profits; Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds; Jeremy Siegel, Stocks for the Long Run; Edwin LeFevre, Reminiscences of a Stock Market Operator; and Jim Collins, From Good to Great.
In the question and answer session, Pile was asked how he can know that a stock has received institutional sponsorship. The answer is that institutional sponsorship is indicated by an increase in the stock’s volume.
Gold and Silver Shares Act II
By William Parmenter, editor
Michael McGowan, publisher of Financial Foghorn, spoke on Gold and Silver Shares, Act IIat the April 16 meeting of the Los Angeleschapter of the AAII at the SkirballCenter.
McGowan has worked in the financial services industry for more than three decades, as a stockbroker, a bank trust portfolio manager, a director of training and as a teacher. He is a graduate of PennState and Hastings College of Law. He is a former deputy district attorney and a certified financial planner.
His book Financial Foghorn’s Guide to Gold (Investor Education Services, 2008) was available for attendees to purchase, and is also available at McGowan’s website
McGowan, a former prosecutor, and a self-described “recovering lawyer,” pointed out that his strong suit is skepticism.
He said he got interested in gold eight or nine years ago, and studied it intensively.
Polling the audience, he found that approximately two-thirds owned mutual funds or ETFs of gold, and around 20 percent owned actual gold shares. He was surprised by the high figures of gold ownership.
He compared owning gold to a play. Act one was when the sharpies got in. Act two is when the institutions (for example Cal PERS) buy in; that is where we are now. Act three will be when the general public gets in, and they will end up losing their money.
Since 2001 there has been a giant secular
bull trend in commodities. We are half way through the commodities bull market. China is driving the rise in commodity prices.
There is an equity versus commodity teeter-totter. When equities are up (eg General Motors) commodities are down (eg copper), and vice versa.
At this point bonds are slightly toxic. The stock market is an exercise in crowd psychology.
Gold is money, and has a number of advantages. It is sturdy and chemically inert. Gold is alloyable, divisible, ductile, portable, recognizable and scarce.
The uses of gold and silver include: it is the foundation for money, insurance on U.S. dollars, used for jewelry, dowries, industrial coatings and electrical conductors. Other applications include: solar and heat reflectors, dental uses, pharmaceutical and biological uses, nano applications and religious decorations.
Gold is on people’s minds, such that it appears in many popular sayings, such as: a golden age, the golden state (California), gold rush, heart of gold, a golden touch, the golden rule a golden parachute, gold-digger and golden boy.
Reasons for the precious metals bull market include: the bond market peaking, a commodities bull market, the sinking value of the dollar, the large federal trade deficit, the huge amount of general indebtedness, wars, and the demand for precious metals is increasing.
Ways not to buy and own gold include: stay away from numismatic coins (they require expertise), buying via television, or EBay (due to big markups), and buying jewelry (it may have only ten percent gold). Stay away from gold bars (is it real, or tungsten?), avoid paper (GLD and SLV) and avoid futures (80 percent of investors lose).
Ways of owning gold include mutual funds, mining shares and gold coins. McGowan recommended owning the actual gold, taking delivery and keeping it in a safe.
A good place to shop and buy gold coins is at the thrice yearly Long Beach Coin Show. Information can be found at The show is held in February, June and September.
Books to read on gold include the titles: Mining Explained, Goldbug, Guide to Gold, The Gold Watcher, The Golden Rule, Precious Metals Investing for Dummies, Gold Wars, and The Creature from Jekyll Island.
On the topic of gold defense, McGowan touted the ownership of precious metal coins, as being free from counterparty risk. Gold and silver coins, including bullion coins, of any recent date are good. He suggested eagles, dimes, maples and libertads, but to stay away from commemorative coins. Also, he said to avoid GLD, SLV in ETFs. Coins are like bottles of wine in the wine cellar; do not trade them.
McGowan pointed out a number of free precious metal websites, including: .northernminer.com. .infomine.com, .youtube.com(miners), .321gold.com., .jsmineset, .goldseek.com, .silverseek.com, .gata.org, .zerohedge.com.
Some gold mining companies that bear a speculative look:
Gold Corp (GG), selling at $43 a share, with 12 mines.
Yamana (AUY), selling at $12, with three mines.
New Gold (NGD), selling at $10, with three mines, a growing company.
Gold Resource (GORO), selling at $25, in Mexico.
Premier Gold (PIRGF.PK), selling at $7, at RedLake.
Crocodile Mining (CROCF.PK), selling at $1.
Some silver mining companies that speculators could be interested in:
Silver Wheaton (SLW), selling at $43 a share, a $15 billion market cap, headquartered in the Caymans.
Pan American (PAAS), selling at $39, with a $4.2 billion market cap, with nine mines.
Hecla (HL), selling at $9, in Idaho, with a $2.8 billion market cap.
MineFinders (MFN), selling at $10, with a $1.2 billion market cap, a Mexican mine operator.
Great Panther (GPL), selling at $4, in Mexico, with a $473 million market cap.
McGowan said silver is a better investment than gold this decade. Silver is an industrial and monetary metal. It has the highest electrical conductivity, and the highest solar reflectiveness.
The U.S. strategic stockpile for silver was depleted in November, 2000. In 2008 680 million ounces of silver were mined, but the demand was for 800 million ounces.
Silver has a “little brother” trading pattern with gold. September through May is the gold and silver selling and buying season. The summer season is flat.
McGowan’s suggested precious metal speculations include:
For developing and exploring: TC, PIRGF and AUNFF.
For producers: GORO, NGD, MFN, and GPL.
For royalty: RGLD, SLW, and FNNVF.
For majors: GG, PAAS, AUY.
For coins: bullion funds, CEF, PHYS.
For share ETFs: GDX, GDXJ, GLDX, and SIL.
For income: GGN.
He closed with a Buddhist proverb, “If we are facing in the right direction, all we have to do is to keep walking.”
In the question and answer session, McGowan mentioned two rare earth companies to look at: Moly Corp, and Linus.
He said he prefers ETFs to mutual funds, because there is less dilution, and fewer weak names in the portfolios. He mentioned GDF and SIL.
How can you know if the coins you buy are counterfeit? Look at the edges, and test them with a magnet,Buy sellable coins, for example rolls of pre-1955 dimes, or good condition Morgan silver dollars.
McGowan thinks the country will have hyperinflation.
His last thoughts: investing is managing risks. Investing is persistence.
Education Nuggets
By William Parmenter, editor
Dr. Don Gimpel talked about the chart-of- the-day during his five minutes of investor education at theApril 16meeting of the Los Angeles Chapter of the AAII at the SkirballCenter.
Gimpel loves the internet, as it is great for research. If you sign up for the chart-of-the- day, you get a very timely chart, that give strong insights into market conditions. The website is:
Orange CountyAAII Announcements
For more information about the OrangeCounty chapter of AAII and their meetings, go to .
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Pro FormaPro Forma Editor William Parmenter
Pro Forma Editor, Emeritus Orvis Adams
SIG GROUPCHAIRMEN
IBD Meet-up/ AAII CANSLIM Norman Langhout
Mutual Fund Group Gunter Hagen
Options Group Robert Morgan
Pasadena Group Ivan Wong
Palm Springs Group Patti Gammino
San Fernando Valley Group Evan Press
Westside Computer Group Don Gimpel
Pro Forma is offered free of charge exclusively via email and is also available for downloading from the Los Angeles Chapter web site at: .
The American Association of Individual Investors is an independent nonprofit corporation formed for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research.
Pro Forma is published for advising members of the groups' activities and for sharing information. All material compiled without verification of accuracy to a specific task or computer system. All material provided in the ewsletter is for educational and illustrative purposes only. Comments are the views of their author and no other person or organization. Investing is an inherently risky business. Investors may loose their entire investment or more. Past performance is not a guide to future return.
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