Featuring Lutts’ Logic:
A Sure-Fire Hiccup Cure … and More
In Praise of Discrimination
Liquid Investments
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Last week my wife and I were dining at a local Mexican restaurant (I had the chile verde) with my cousin and her husband when, out of the blue, he passed on this “sure-fire hiccup cure,” which I now pass on to you.
Like most hiccup cures, this one involves drinking water. The refinement, however, is that you hold two chopsticks across the rim of the glass in the shape of an X (lacking chopsticks, substitute other tableware), and drink through one of the quadrants at normal speed while trying to bring into focus the center of the X.
I haven’t had occasion to try it, but it sounds as good as anything else.
In return, I gave him a little known life skill that I’ve been using for more than two decades … a better way of tying shoelaces.
The vast majority of people are taught the “standard shoelace knot,” Make a loop with one end, wrap the other around it, and pull a loop through.
Trouble is, that knot often comes loose as the day wears on.
So we’re taught to double-knot it by tying an overhand knot with the remaining loops … but that creates a knot that is then difficult to untie.
The solution for me is the “Better Bow” shoelace knot. You start just like a standard knot, but wrap around the original loop twice before pulling through it. It’s simple, it lasts all day and it unties as easily as a standard knot when desired.
And now, thanks to a little Internet research, I know there are other knots, too, several of them better than the standard knot. If you’re really looking to improve your life, you’ll consider some others as well.
Just note that it’s very hard to change habits. You’ve got to force yourself to avoid the familiar, and consciously practice the new until it replaces the old. For me, adopting the “Better Bow” decades ago has proved worthwhile in time savings and reduced aggravation.
And now one more better way to accomplish the mundane … tying a necktie.
Most people tie a Four-in-Hand, which can come out crooked and somewhat small.
Some tie a Full Windsor, which is square, but somewhat wide, or a Half Windsor, which is a bit smaller.
For nearly twenty years, I’ve been tying a Pratt/Shelby, which is balanced and fairly wide, yet not as wide as a Windsor.
I’m not going to describe it here. You can find plenty of instruction online. And if you really want to get into the subject, you’ll read “The 85 Ways to Tie a Tie,” a book by Thomas Fink and Yong Mao, based on two mathematics papers published by the authors in the journals Nature and Physica A. I’m not that into the subject--I rarely wear ties these days--but I do find it interesting that the authors proved mathematically that there are exactly 85 ways of tying a necktie.
I also find the history of the Pratt/Shelby knot interesting. Introduced in 1989, it was reportedly invented by Jerry Pratt, who worked for the U.S. Chamber of Commerce, but it was made famous by Minneapolis news anchor Don Shelby.
One more thought. Learning a new skill stimulates your brain, and the more you stimulate your brain into building new connections, the more likely you are to delay the onset of Alzheimer’s and in general improve your mental health.
Good luck!
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Now on to more serious stuff.
A week ago Monday, I concluded my column by recommending a young Chinese stock, Duoyuan Global Water (DGW). The company makes water-processing equipment for a wide variety of uses, from high-purity sterilizers for pharmaceutical companies to high-volume grit and sludge processors for wastewater treatment plants. Business is booming, because China is booming and Duoyuan is the leading company in the industry. It’s a simple story … with big potential. Since I wrote about it, the stock has soared from its small base at 30 to a record high of 36, and I think more progress will come in time. But a well-deserved pullback began today, so if you haven’t bought yet, I suggest trying to get on board after this pullback ends.
(To learn more, check our archives at http://www.cabot.net/Issues/CWA/Archives/2009/07/A-High-Potential-Stock.aspx.)
Today’s serious topic is not Duoyuan’s stock, but the company itself … specifically, the following notice that can be found in the news section of the company’s web site.
“In the mid of March, 2009, Duoyuan conducts a skill competition for Workers at the production line to culture a competitive work atmosphere. There are six groups in this match which are a assembly group, a locksmith group, a miller group, a latheman group and sheet-metal worker group. After two-hour tense competition, each group appraises and elects the nominees for the top three prizes. By this skill competition for workers at the production line, it increases their passion at work and improves their skills. Many workers express that they will make use of their spare time to learn professional technology knowledge to improve their work efficiency and reduce reject ratio.”
Ignore the grammar; translation into English is tricky … and, happily, not a key factor in the company’s success.
But ponder for a minute the concept of holding competitions among employees to see who is better and who needs to work on their “technology knowledge.” Does that sort of thing still happen in the U.S. workplace? Is it even legal anymore?
Or have we come to the point where it’s more important to make everybody feel good about doing their best … even when some are not even trying to do their best? (I have no doubt those Duoyuan employees were doing their best, knowing that their jobs might be at stake.)
The fact is, we can’t all live in Garrison Keillor’s Lake Wobegone, where “all the children are above average.”
When I was a kid in 4th grade we used to have regular spelling bees, and everyone in the class had to participate. I loved it because I was good … and often ended up facing off against Judith Tivnan. On the other hand, we also had mandatory physical education, at which I wasn’t so good. Now we have neither, for a variety of reasons.
It doesn’t feel good to be recognized as a below-average performer at something. But for managers who are trying to run a business, the ability to discriminate among employees according to ability is an important step toward achieving corporate goals, among them growth and profitability, and I have no doubt that Chinese companies are doing just that.
Once upon a time, the word “discrimination” had this positive connotation; it suggested fine judgment, the capability of making small distinctions. But in recent decades that’s been superseded by the legal definition, which has the negative meaning of treating a person based on the group to which that person belongs rather than on individual merit.
The recent dust-up in Cambridge, for example, between the professor and the policeman hinged on perceptions of discrimination. Happily, a little intervention from the most powerful man in the world seems to have put an end to it.
Sadly, three of the four participants at the “Beer Summit” chose brews made by foreign companies. President Obama went the populist route with Bud Light, the best-selling beer in the U.S., now owned by Belgian-Brazilian InBev; Vice President Biden chose low-alcohol Buckler, owned by Heineken; Professor Gates chose Blue Moon, owned by Molson Coors of Canada; and Officer Crowley chose Samuel Adams Boston Lager. (Samuel Adams is now the largest American-owned brewery in the U.S., but most of its beers are brewed outside Massachusetts.)
If I were invited to the Summit, I’d have asked for a real Massachusetts beer, maybe an Ipswich Ale or a Harpoon Ale.
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I looked through all the public beer companies and found nothing interesting. My favorite alcohol investment is Central European Distribution (CEDC), which is leveraging leadership in the vodka business in Poland, Hungary and Russia to expand geographically while enlarging its product portfolio. It’s a good moderate growth story.
A more attractive beverage investment however, for investors who want fast growth, is Green Mountain Coffee Roasters (GMCR), which we’ve mentioned here before.
Michael Cintolo of Cabot Market Letter is a big fan of the stock; he added it to his Model Portfolio on May 5 at 50, and is now sitting on a 36% profit. In last week’s issue, he wrote this:
“Green Mountain Coffee Roasters has released a new iced tea product for use in its Keurig brewers, which could add a bunch more revenue during the summer. Fundamentally, we still enthuse about the company’s prospects, and the stock itself continues to act very well, busting loose from a six-week consolidation last week on heavy volume. But a big key will be GMCR’s reaction to earnings, which are due out Wednesday evening. We’ll be watching closely, but right now, the evidence is bullish. Sit tight if you own some, and if you don’t, wait for the earnings reaction.”
Well, the earnings came out and they were great; revenues grew 61% to $191 million, while earnings doubled, to $0.36 per share. But as Mike said, more important was the stock’s reaction to the report. It was volatile for the day, trading between 62 and 72 on four times average volume. But it finished up, and it’s traded tightly since, continuing to build a base that should eventually lead to a breakout above 70 … assuming the firm’s four million share secondary offering goes well in the day or days ahead.
Longer-term, the key attraction to Green Mountain is its razor blade business model. The recurring income from the disposable K-cups, which make you a cup of coffee for less than 50 cents, represents a very predictable stream of income for the company. If you don’t own it, it’s not too late to buy.
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
Cabot Wealth Advisory
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