I Want My Annual Reports
Christopher Lahiji would probably be in the Guinness Book of World Records if it weren't for his mom. Last March, the 19-year-old stockpicker decided he would read the most recent annual report for every stock listed on Yahoo! Finance. By the time he finished the so-called Lahiji Project eight months later, 12,019 glossy bulletins were stacked in the garage and under the coffee table of his mother's living room. "My mom got really pissed about the level of trash," Lahiji says. "I was receiving five or six boxes of mail a day." So although he documented the project on video, he had to throw out all the physical evidence.
Lahiji, a finance major at Santa Monica Community College in California, says he learned four valuable lessons from the project: There are thousands of tiny, undiscovered stocks. Companies will send you tons of free stuff if you show the slightest interest. European annual reports "whup the crap out of" U.S. ones in design. And "women don't get turned on by guys who spend countless hours feeding themselves financial information."
Lahiji has been picking stocks since he was 11. Sneaker maker Fila (FLH ) was his first buy; he lost most of his father's $6,000 investment. By age 15, in 1999, he had invested $2,500 of his birthday money, and by the start of the bear market in 2000, his portfolio was worth $12,150. Since then, it has doubled in value, he says.
Lahiji has always been interested in tiny companies with market caps of less than $100 million. But his latest undertaking opened his eyes to companies he never knew existed. "Reading these reports, I felt like Lewis and Clark going into uncharted territories," he says. "Many small companies told me nobody had asked for their reports before."
SHOWERED WITH SCHWAG. They were so happy someone paid attention that they showered Lahiji with "schwag," or promotional items. Among his haul: 3,500 pens, 800 T-shirts, 700 hats, 600 mouse pads, 500 packs of breath mints, 400 mugs, 100 golf balls, 80 calendars, 50 mechanical pencils, 40 cup holders, 20 backpacks, five bobblehead dolls, one military boot, a Dirt Devil vacuum, and a box of female condoms. His parents made him donate most of it to the Salvation Army.
As he waded through all the schwag and reports, he discovered 146 micro-cap companies he really liked and posted analysis of each on his Web site, Lahiji.com. Then, after he finished his project in November, he decided to test his stockpicking mettle by creating a virtual trust, the Lahiji Tiny Fund, with an imaginary $10 million. He intends to leave the portfolio untouched for a year to satisfy skeptics who might think he's trying "to pump and dump" the stocks.
So far, he has proven his stockpicking skills. The fund has gained 33.1% since Nov. 1, vs. returns of -1.5% for the Dow Jones industrial average and 2.4% for the NASDAQ Composite. His biggest winners: Rediff.com (REDF ), an Indian Web portal, up 1043.5%, and online dating service udate.com (UDAT ), up 194.2%. Nine of his stocks have triple-digit returns, but four have losses of more than 70%, highlighting the benefit of diversifying in this volatile sector.
CHATTING UP SECRETARIES. Once Lahiji decides he's interested in a stock, he calls the company for information. Some small companies even connect him to their top brass. He has talked to several CEOs but often prefers to gab with their secretaries. "They tell me everything from when the CEO gets off the golf course to why the CFO 'really' resigned," he says.
He also trolls Yahoo! Finance and company sites for news releases suggesting a positive shift in a company. Take Israeli company Arotech (ARTX ). Last year, it stopped making fuel-cell batteries for camcorders and started producing tank armor and other military gear. The shift has caused its revenues to spike, but the stock is still near its all-time low of 41 cents. Lahiji thinks that when investors discover the new, improved company, its shares will run.
Talking to Lahiji is a bit like conversing with a supercomputer. Mention a company, and he'll spit out a list of facts about what it makes and its business prospects. Needless to say, he's not very popular with the ladies. "During this project, I brought three different girls over to watch TV, do homework, or study for an upcoming test," he says. "As soon as they saw what I was up to, they never set foot in my house again."
He's also having problems in school. He had to drop out of two classes, Accounting 2 and Speech, and he almost flunked his midterms this April. "My teacher in one of my classes takes my test, reads it, and says: 'So much talent, but decides to be lazy instead,"' he says. Maybe he can earn extra credit for reading 12,019 annual reports.
By Lewis Braham
With Christopher Palmeri