E-book investments are for speculators only
.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:
I’ve got a bee in my bonnet about the e-book industry – I think that it will push hardcover and softcover books off the shelves so the big booksellers like Barnes & Noble, Books-a-Million and Borders will have to close their doors. Amazon and Sony have great e-books right now, and when Apple comes out with its new e-book, I think it will spell the beginning of the decline of the book publishing industry. I would like to find a stock that’s involved in this business but that hasn’t been discovered like Amazon or Sony. Do you have any thought on which stock I could buy and, hopefully, it sells for less than $10 a share so I can buy lots of shares? If you find a stock that could participate in the e-book business in a big way, I’d cash in my individual retirement account (IRA) and my life insurance policy that I don’t need anymore and buy the stock. If I could hold it for 10 years and sell it for a lot of money, then I could really be a happy person. Can you recommend a stock that is on the ground floor?
M.M., Bethlehem, Pa.
Dear M.M.:
Wow! I’d like to find another “Microsoft-in-a-Garage,” too, hold it for 10 years and “sell it for a lot of money.” Although money won’t buy you happiness, it certainly makes misery much easier to live with.
I’m a technological Luddite and do not have a good grasp of high technology that turns data into bytes, bits and pixels, sending it through walls and across oceans at the speed of light. So I asked my friend Nathan Detroit, who is a vulture venture capitalist, for a recommendation. His record is pretty good, and he has failed me only twice in the past 23 years of our association.
Detroit suggested a company called Innodata Isogen Inc. (INOD-$7.84), a smallish $82 million revenue company that provides what is known as “knowledge process outsourcing” services, as well as publishing and related information technology services. Because INOD’s services also include digitization and conversation, authoring and copy editing, its management is focusing on the media-publishing business. And Apple could be the catalyst that introduces the e-book (look what it did to the music and phone business) in the coming nine to 12 months. Therefore INOD may be one of the few pure plays in this business.
However, Detroit would want me to tell you that “no matter how good this stock looks, a wise man will not play leapfrog with a unicorn.” Don’t go into hock; buy only what you can afford. So hold on to your IRA and your life insurance money and be mindful that your request for a ground-floor investment in the e-book market is just one of thousands.
INOD is currently digitizing and converting thousands of books into an e-book-ready format for Amazon and Sony, but the incentive here is the speculation (note “speculation”) that Apple will soon be releasing a tablet that allows users to download e-books via iTunes. You are hoping that Apple’s previous successes could lead to an explosive boom in downloading publications.
E-book revenues are up 175 percent so far this year and growing. Despite this impressive growth, e-book revenues represent less than 1 percent of the $20 billion book publishing industry. According to a recent Credit Suisse report, e-book revenues could exceed $4 billion in the next five years.
INOD has a strong balance sheet, with less than $300,000 in long-term debt, $23 million in its checking account and a book value of $1.70 per share. On the income side, INOD posted 2008 net income of $13.5 million on revenues of $82 million, which translates to a net profit margin of 16.4 percent, and that ain’t chopped liver.
Only two analysts follow INOD, which only has 25 million shares outstanding. Though Detroit and I like this stock as a classy speculation, I caution you and others to be conservative in your purchases. If you cash in your IRA and life insurance policy to buy INOD, I can almost guarantee that as soon as you buy several thousand shares, the price will fall by 50 percent in less time than Peter Piper can pick a peck of pickled peppers.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2009 Creators.Com
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