Will "friend-casting" be as big as search for discovering information?

Here is a link to an interesting article that appeared recently in the San Francisco Chronicle.

Entitled "Facebook directs more online users than Google," the article cites data illustrating that Facebook sends almost as much traffic to certain websites (and more in some cases) than search engines such as Google.*

As with any research for investment purposes, the quality of the source must be considered, and it is obvious that many of those quoted in the article make their living trying to convince companies to hire their services for "social network optimization," which they believe will be as important or more important than "search engine optimization."

Even accounting for some bias, however, these issues are important ones to be aware of. In fact, we wrote about them on this blog over two years ago, in "A paradigm shift in the way you get information." This topic has enormous consequences for advertising, as George Gilder predicted over ten years ago (see the discussion in that blog post) -- in fact, it has huge consequences that stretch far beyond that area, and which may overturn many social and cultural realities that are based around the familiar advertising model that was created by the advent of radio and especially the advent of television in the 1950s.

All investors should pay close attention to this subject.

* The principals of Taylor Frigon Capital Management do not own securities issued by Google (GOOG).

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Have you heard of this company? TSCO

In the past, we've explained some of the fundamental tenets of the classic growth investment philosophy that we follow at Taylor Frigon Capital Management. To revisit those, see "The Classic Growth Stock Investment Philosophy" or the series entitled "Beautiful Growth Companies" (this is a link to part I, and below that post are links to parts II and III).

Recently, we described some aspects of our investment thesis for a company that is a classic Taylor Frigon growth company, in order to provide some idea of how that theory translates into actual investment holdings, as well as to encourage investors to focus on the kind of good businesses which can be found in almost any economic environment -- a focus that is very easy to lose amidst the noise of the financial media and the geopolitical events that crowd the news each day.

We also selected a growth company that is outside of the "tech sector," to illustrate that (although we believe there are excellent growth opportunities related to technology right now) there are growth companies in many sectors that investors might not think about when they hear the phrase "growth stock."

Here is another one, which we have owned for clients in our portfolios since 2004, a company called Tractor Supply*. Tractor Supply Stores are located in rural communities in the continental United States, and their stores serve a niche that other retailers do not address. The company started out serving the needs of farmers and ranchers, but their merchandise includes a wide variety of goods difficult to find under a single roof anywhere else, and includes pet supplies, well pumps, generators, other power tools, tack and feed, welding equipment, lawn and garden products, and men's and women's workwear. Each Tractor Supply Store has on staff a welder, a horse owner, and a farmer.

The company has over 800 stores in 40 states, which may sound as though they have the nation pretty well covered, but the map below illustrates that there are still plenty of markets where Tractor Supply can continue to grow, and where customers would likely be very happy to see them (to see a more detailed list of their store locations, click here for a link to the company's store list by state).
















The stock performance since we began investing in the company (in September 2004, at the very left end of the chart below) has been a bit erratic, and reflect fears in 2008 and 2009 that the US consumer was going to fall off a cliff, never to return (at least not for the foreseeable future). However, the company's growth has been strong and the holding is illustrative of the point we have made about investing through cycles when the growth story of a business remains intact.













In its most recent quarterly earnings, the company beat analysts' expectations in both revenues and earnings, growing its earnings by 55% over the year-ago quarter.

* The principals of Taylor Frigon Capital Management own securities issued by Tractor Supply Company (TSCO).

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For later posts on the same subject, see also:

• "Have you heard of this company? DLB" 03/05/2010.
  

• "Have you heard of this company? HITT" 07/06/2010.
  

• "Have you heard of this company? IIVI" 08/05/2010.

• "Have you heard of this company? CHRW" 09/20/2010.
  

• "Have you heard of this company? NAT" 11/22/2010.

• "Have you heard of this company? EZCH" 12/09/2010.

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Why can't we all just get along (on economic policy)?

The latest video (above) from Dan Mitchell of the Cato Institute reiterates the points made in a video that we posted and discussed back on January 15 of last year, when President Obama was still President-elect Obama and the market had yet to make its March lows, let alone recover.

As Dan Mitchell says in this video, and as he explained in the previous video from January 2009, government stimulus does not work. He takes pains to point out that this fact about the uselessness (and actual harmfulness) of government stimulus holds true whether the so-called stimulus is enacted by Republicans or Democrats (for that matter, it holds true for Greens, Libertarians, bipartisan coalitions, or any other party or un-party, in any country and in any decade).

What actually works to stimulate economic development (and this has been proven over and over in actual historical experience throughout the past century) are lower tax rates on marginal income, and lower levels of growth in government spending (at least keep it below the growth in the economy). While real reductions in government spending are desirable, we are trying to be pragmatic here: we simply ask for lower levels of growth in that spending, which goes up every year and probably always will!

It is important to emphasize lower tax rates, because (as we explained in this previous post) lower tax rates lead to greater economic activity and growth and ultimately then to higher tax receipts (charging a lower percentage but on a larger amount of profits).

This truth should not be a partisan dispute, any more than the law of gravity should be considered the exclusive province of Republicans or Democrats.

What social policies to pursue with the expanded revenues can be a partisan issue -- let the parties argue over that all they want. They can argue over how much of the increased revenue should go to defense spending, or whether taxpayer dollars should be funneled to something called the National Endowment for the Arts. With all the time that they save by not having to argue over stimulus packages, politicians could argue about these other issues all day long.

What mystifies us is that members of both parties continue to act as though government stimulus somehow helps the economy. Everyone should simply agree that it never has and it never will, and move on to discussing and debating other issues.

Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.

For later posts dealing with this same subject, see also:

• "Lower tax rates stimulate growth" 07/27/2010.

• "Glenn Beck is an economic butterbar" 11/04/2010.

• "The 'wealthiest' rates matter to everyone" 12/03/2010.

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Have you heard of this company? RMD

There are always plenty of events for investors to focus on that can easily distract them from the start of the day until its end -- big issues of politics, global events, market reversals, and fears about the next crisis (whatever that will be).

However, a constant theme of our blog has and always will be that investing is really about matching up capital with solid businesses, and we believe that investors should be focused on finding good companies even in the midst of uncertain environments (as we have noted before, the 1970s serve as an excellent historical example of the importance of this concept).

To illustrate this, and to point out that even in the midst of general angst about the economy and about potential political events good companies are continuing to grow their business and make money for their shareholders, we'd like to call attention to a business we've owned for our clients since 2003, a specialized medical device company called ResMed.*

We believe that ResMed is an ideal example of a Taylor Frigon growth company. The company provides continuous positive airway pressure (CPAP) devices such as masks and respirators, which are used in the treatment of obstructive sleep apnea and other sleep breathing disorders.

Awareness of sleep breathing disorders is on the rise among both patients and physicians, as well as understanding of the other health problems that can be related to these issues -- including extremely serious health problems such as heart disease, diabetes, and strokes. Because they take place during sleep, when we are unconscious, awareness of sleep problems has been very limited in the past. In fact, research shows that up to 80% of those with sleep problems are unaware of the fact.

In many ways, the incredible importance of sleep in health is only now becoming widely appreciated. Harvard Medical School has created a website dealing with the subject of healthy sleep here, which gives some indication of the depth of this issue.

Because this issue is so important but so underappreciated, it represents a potential paradigm shift. As awareness has grown among physicians and the general public, the perceived value of products that can promote healthy sleep has grown. ResMed, which was founded by a pioneer in CPAP research, has been an important provider of sleep treatments during this time.

Not only is the market expanding due to the increasing awareness of the issue itself, but ResMed as a business is taking market share. There has been an increased understanding of the importance of using high-quality CPAP devices -- patients tend to stop using lower-quality devices, which doesn't do them any good and in fact does them harm (in addition to wasting their money). ResMed is a maker of high-end masks and devices.

Recently, ResMed announced quarterly revenue growth of 23% over the year-ago quarter, and earnings growth of 36% over the year-ago quarter, beating analysts' estimates in both numbers. The company is one of the only publicly-traded businesses focused solely on their particular market.

We believe that focusing on the fundamentals of well-run businesses in front of fertile fields of growth is important for investors, all the more important during periods in which worry and distractions are widespread. Doing so may also help them to sleep better at night.

* The principals of Taylor Frigon Capital Management own securities issued by ResMed (RMD).

Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.

For later posts dealing with this same subject, see also:

• "Have you heard of this company? TSCO" 02/11/2010.
  

• "Have you heard of this company? DLB" 03/05/2010.
  

• "Have you heard of this company? HITT" 07/06/2010.
  

• "Have you heard of this company? IIVI" 08/05/2010.

• "Have you heard of this company? CHRW" 09/20/2010.
  

• "Have you heard of this company? NAT" 11/22/2010.

• "Have you heard of this company? EZCH" 12/09/2010.

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How your view of the crisis of 2008-2009 impacts your understanding of today's big issues

Here is a link to a very interesting interview of former Treasury Secretary Hank Paulson by economist Larry Kudlow.

It is worth paying attention to, because it highlights the difference between major "belief systems" regarding what caused the 2008-2009 financial crisis, belief systems that play a crucial role today in shaping the different views on where the economy is right now and what measures should be taken to prevent a similar crisis in the future.

Former Secretary Paulson repudiates the arguments outlined recently by Steve Forbes in this column (in the February 8 edition of Forbes), in which Mr. Forbes argues that Fannie Mae and Freddie Mac, government interference in housing lending, and above all the disastrous role played by the introduction of new mark-to-market accounting standards in 2007 played in the 2008 meltdown. Interviewer Larry Kudlow mentioned that column in the first part of the above video.

Mr. Paulson's arguments against this view of the crisis are not very convincing. We ourselves have put forth arguments similar to those made by Mr. Forbes in numerous previous blog posts during 2008 and 2009 (see for instance:
"Big news on mark-to-market accounting" March 13, 2009
"It's a panic, not a Great Depression" January 21, 2009
"Taking stock of 2008" December 31, 2008
and "The wages of socializing," about Fannie Mae, Freddie Mac, and the Community Reinvestment Act, from July 16, 2008).

If, as we have argued, the crisis of 2008-2009 was a financial panic which then spread to the rest of the economy, then the sharp recovery (which began when Congress pressured FASB into removing the mark-to-market accounting rule at the heart of the panic) is not a surprise. It is also plain that the recovery has not been the result of government "stimulus" (for more on that subject, see our post from January 15 of last year). If this view is correct, then further stimulus is not necessary to keep the economy from collapsing again, and in fact (as we argued in that January 15 post), it will retard real growth.

These issues are very important for investors to understand, and are worthy of careful consideration.

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