Rule #1 Finance Blog

With Investor Phil Town

YOUR HOMEWORK: HELX

This letter is from Cathy in New Hampshire, who’s proven her ability to accomplish amazing things when she puts her mind to it.  Rule #1 investing is next on her list.

[Note: this letter was originally submitted on May 16. Use Cathy’s numbers as an example only.]

Phil,

On Wednesday April 26, I went to the GET MOTIVATED in Manchester NH. I signed up for this workshop, something to do with investools.  After the seminar I went home all i could think about was this guy who was a ex-Green Beret and former river guide. His name was Phil Town he was a self-made millionaire.  He had lived in a teepee and “drove around in a really loud black Harley Davidson.”

In my spare time I checked this guy Phil out on the internet. I was inspired by all the info I read about him. I just recently went to the 2 day workshop. I only went the first day, because if I went the second day they wanted $$$$. I have never in my life even thought about stocks (businesses), never mind buy and sell them to make money.

I went home and checked to see if the investools had shut me off yet from the temporary internet access. I was excited they didn’t yet. So i have been playing all weekend trying to figure this out.

I will eventually buy investools, because i trully believe that you need the right tools to do the job right.  So for know i bought your book and a few others you recommended.  I will read and play until they shut me off.

3 years ago we lost our home.

We had no mortgage, we had some financial freedom. Family was sick all
the time hired profesionals to come in and do some air quality testing.

Reports showed mold spores to nemerous to count. It was devistading.

We were homeless for 3 months, lost everything.

I told myself back than that we could get through this.

Filled a claim with the insurance company, they denied our claim. Left us with
nothing.

We made a plan, we told our selves that we would build a new house. The first mistake we made was a hard one!

We had gone to the bank to see how bankable we were.

We were great we owned our buisness and our contaminated house. We had lots of equity.

So we hired a crew to come in and get ride of the contaminated house.
We started to build our new house. We had no need to borrow money at
this point because we had savings. so now were living in a dumpy
trailer and builing our house. Following our plan.

So we get to the point were we need more money to finish the house. So
we go back to the bank were we were bankable, for them to tell us that
because we got rid of the contaminated house. we are not bankable
anymore!!!

We truly did not know what we were going to do. So we made plan # 2.
Plan 2 was that we would finish the house ourselves. And we did just
that. our business is small 1 man operation. So my man worked all day
and I learned how to sell on ebay. and at night we would work on our
new home. Than when the house was finished enough so that we could
borrow money against it we borrowed money.

So the moral of the story is when you make a plan and stick with it you can do anything.

4 years ago we lost aproximately $200,000 plus our personal belongings. Today we have a big beautiful house not quit finished yet but worth about $350,000.

You have insired me to do this, I know I can do this. I would like to
start of taking baby steps paper trading and so on, before I put real
money on the line.

I do not have a mentor, I am on my own. I Wanted to pass this one by
you to see how i’m doing so far in looking for the right stock
(business).

Business is HELX.

It passes phase 1, and phase 2.

I am waiting to see what happens at 9:00 am.

I am whaching it waiting to see what the volume is going to do. of course I am just paper trading at THIS POINT.

What do you think, am i missing anything.

Cathy

My response:

Good letter Cathy.  Thanks.  So tell me what you know about Helix.  Who
runs it?  Do you trust them?  Do you understand their business?  Does
it have a big MOAT?  In other words, do you know what you are buying
well enough to know if it’s on sale?

I checked the MOS really quickly.  The analysts expect a lot of growth
over the next five years: 30% plus.  But historically it doesn’t show
that so using the more conservative historical growth rate we’re going
to get a lower Sticker price.  So what growth rate would you use if you
were going to buy the entire business and you wanted to make a fair
offer?

Phil