Finance phrenologist baffled by Chinese Chess whiz

by Martin Dekom

The other day I was reading the Civil Code of the county where I work and live. This tome is not about to replace Reader's Digest as the top choice for light bathroom reading. I did notice that in my county fortunetelling is illegal, to include tarot and phrenology, but not astrology. Let's be glad these fine lines are drawn, or else, so much for my job.

Actually, picking stocks is less crystal ball than people are led to believe. In fact I'd be out of business if everyone followed two rules: diversify and do your homework.

Peter Lynch, in his much celebrated bestseller "One Up on Wall Street," said to look for "good ideas" to invest in. Thanks Pete, your advice has done wonders for my business while hapless investors saddle themselves with "good ideas." A good story has sold many a penny stock and suckered investors.

Not to muddle the soup any, but the best way to know if something is a "good idea" is to look at the balance sheet. Is the company making more money than last year (revenues)? More profitable (net income)? More efficient (margins)? These questions are a better determinant than your gut, and frankly, I doubt too many people's GI system would have alerted them to network routers or ISDN technology. Unfortunately, explanations of these complex technologies often make as much sense as any of two dozen Clinton appointees trying to explain where the files came from, the money went, or the body was found.

A good example of this is my much-touted favorite Trident Microsystems (NASDAQ: TRID). They are a leader in gizmo production, a true pioneer in gizmo technology. Their gizmos are so complex that only Chinese math whizkids and Chessmasters could hope to understand them. I suspect it's alien technology, utilizing space-age compounds. But, they have consistent double-digit profit growth, Salomon raised their earnings expectation on them 35% (9/25/96), and their industry is resurgent. On Thursday they were very favorably mentioned in USA Today (but so was Arizona State at #3, so we'll discount that one). The proof of the pudding is in the stock, having doubled since July. Yet I feel it remains undervalued, and could double again and still be less than last years' high.

Lots of momentum = lots of potential. Today it's $17 1/2, having started out the month at 15, the month before at 12. I'd buy TRID at any price less than $20, and it's my expectation to see $30 within a year.

Martin Dekom is a stockbroker with the money management firm, Profit Management Associates, in Atlanta, Georgia. He can be reached at 404.320.7620, or by Email at His column is published on the Internet, in The DeKalb Champion, and The Stockbridge Advertiser.

This is only a suggestion, not to be ranked above idle gossip. You are responsible for your own decisions. Don't run with scissors, look both ways.

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