On March 9, 2005, billionaire Mark Cuban did something that I think more investors should be doing. He talked about his stocks. By posting his current stock holdings on his popular blog, he was able to ignite a hearty exchange of thoughts with his readers while squashing any rumors about his actual holdings. That last point is significant because as a colorful and rich guy, he's perfect fodder for the rumor mill of desperate chat room investors.
The only unfortunate thing is that his six long positions, for the most part, have done lousy over the last three months. Even though the two stocks that he was shorting at the time have also cratered -- a good thing if you're shorting -- overall, the near-term results haven't been all that impressive.
Then again, he may very well have closed some, if not all, of those stock positions by now. Here in Fooldom, you will notice a disclosure at the bottom of every article with a link to our profiles. We list every stock we own there. We perpetually update the lists to make sure that they reflect our current portfolios. Cuban doesn't need to go that far. When it comes to accountability, he isn't talking stocks around the clock the way we are. I would love to find out what he's holding these days because his original list was an eclectic lot with some intriguing names, but I'm not greedy. I'm just glad to see a billionaire investor open up about his portfolio, instead of having to wait for an SEC filing to indicate that he has acquired a significant chunk in any particular company.
The longest yards
In an April interview with Barron's, Cuban got into his stocks. Like most investors, he can appreciate a stock with sturdy fundamentals. However, he also devours the psychology of investing. That's why he doesn't mind a short-term trade in a stock that may lack long-term value, as long as he believes that momentum and mania will swoop the shares higher.
That's why this report card can't be considered official in any sense. For all we know, he may have sold some of these stocks before they crumbled, or even shorted them to profit from the malaise.
| Cuban's Long Positions | 3/8/2005 | 5/31/2005 | % Gain/Loss |
|---|---|---|---|
| Lions Gate Films (NYSE:LGF) | $11.25 | $10.41 | -7.5% |
| Rentrak (NASDAQ:RENT) | $10.95 | $10.05 | -8.2% |
| Insight Enterprises (NASDAQ:NSIT) | $18.60 | $19.58 | 5.3% |
| Sigma Designs (NASDAQ:SIGM) | $10.62 | $7.87 | -25.9% |
| GuruNet (AMEX:GRU) | $22.20 | $12.25 | -44.8% |
| Tucows (OTC BB: TCOW) | $1.00 | $0.87 | -13.0% |
GuruNet was one of the hottest stocks in the market until its recent debacle. The company went public at $5 a share in October and had quintupled when it peaked in early February. Originally, GuruNet offered a premium software product designed to enhance the online experience. Clicking on a word or a phrase on any Internet page would tap into GuruNet's reference library on more than a million different topics. While there weren't a whole lot of people willing to pay for the service, GuruNet still managed to attract a respectable niche audience of affluence.
In January, the company's business model took a turn for the mainstream. It decided to ditch its pay service and monetize Answers.com by incorporating Google's (NASDAQ:GOOG) targeted text ads into its responses. It was easy to see why the market got excited at first. Google's partner sites receive a fair share of the company's AdWords revenue for every interested click-through. Between Google's fat margins and the click-happy info-curious crowd that Answers.com was likely to attract, it seemed like a match made in cyberheaven.
But there were reasons to be concerned. For starters, one could argue that GuruNet had no business going public in the first place. The company had generated a mere $193,283 in revenues for all of 2004. Would migrating toward the paid-search platform grow the top line feverishly enough to justify the $150 million market cap that the company commanded back in February?
Today's share price gives us the near-term answer. GuruNet posted yet another loss for its March quarter on $175,633 in revenue. Yes, it did produce as much revenue in one quarter as it did all of last year, but it's still a pittance. And any who bought into GuruNet as a cheap way to piggyback on Google's success slid right off. Google may boast gargantuan profit margins, but GuruNet's gross margins were negative.
More than just Answers.com
To Cuban's credit, it should be noted that the only stock that has risen in value since his March entry -- Insight Enterprises -- is also the one that earned his long-term blessing. "Good company I have owned pretty much since they came public," he wrote. The hardware and software distributor has seen its stock more than quadruple since going public back in 1995.
I am also a fan of two of the other stocks that he mentioned. Lions Gate Films has proved itself a worthy indie-film distributor, nimble enough to move quickly and brazen enough to take chances on overlooked films that have become sleeper-hit sensations. Tucows may seem like one of the more speculative stocks in Cuban's March portfolio -- trading for less than a buck -- but it's not as speculative as one would expect from a penny stock. The company is a known online entity, and it has been profitable for 11 straight quarters. Yet with 71.6 million shares outstanding, a whopping number for a company of its size, Tucows may be one of the few companies that would benefit from a reverse split.
Profitable pessimist
The two stocks that Cuban was shorting have worked out well. Each one has fallen in price, and that's exactly what a short seller is looking for in those investing situations. The big winner here has been InterOil (AMEX:IOC). The oil-exploration specialist has seen its shares fall by more than a third since being singled out in Cuban's blog. Last month, the upstart posted a sharp quarterly deficit.
| Cuban's Short Positions | 3/8/2005 | 5/31/2005 | % Gain/Loss |
|---|---|---|---|
| Interoil | $41.51 | $25.00 | -39.8% |
| Imergent (AMEX:IIG) | $11.80 | $10.60 | -10.2% |
Ultimately, you have to admire Cuban for going public with his portfolio. If I had a nickel for every time someone posted that a Cuban, Gates, or Buffett had initiated a position in a certain stock, well, I'd be able to buy my own NBA team.
If more successful private investors -- and even corporate CEOs -- were more forthcoming with what they owned, and why, the market would be a more illuminating place.
Some more Cuban flavor:
- Mark Cuban appeared on The Motley Fool Radio Showtwo years ago.
- That appearance panned out better than his prime-time stint on TV last year.
- Some of Cuban's growth stock picks may be better suited for our Rule Breakers newsletter service.
Longtime Fool contributor Rick Munarriz thinks that the Dallas Mavericks are cool, but he'll side with his hometown Miami Heat any day, especially these days. He does not own shares in any of the companies in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
