For the first 6 months of 1999, our average account gained +49.63%.
If only we were all Druids, who marked their years by the summer solstice, our last twelve months would seem blissfully uneventful. As it is, we mark our yearends in the bleakest moments of a northern clime. Consequently, you might wonder why we struggled in the last half of last year, and then produced the best returns in the 19 year history of our firm so far this year. Agony and ecstasy is the bacon and eggs of our business, and a large part of a successful record is not letting either one get to you too much. That we have such a loyal client base helps us very materially in this, and we are grateful.
The wonderful year so far has been particularly charming in that their have been so many good performers, but two investments have been such standouts it would be churlish not to salute them. Charlie Ergen and his team at Echostar have created a business that is the model for everything we want in an investment. “More TV for less money” is their marketing slogan, and do they ever deliver on it. Currently offering 180 channels of programming for a discount of 20% to what most cable operators charge to give you less than half that, there is no mystery as to why it is adding subscribers at the rate of 70% per year in the first half. Having spent the day at Echostar’s headquarters recently, we are confident you ain’t seen nothing yet. The merger of the internet with live TV, which is available now through a joint venture with Microsoft, is the most entertaining method of watching a sporting event imaginable. We have seen the future, and it is fun. With the launch of Echostar V in August, all of the capital outlay this company ever need make will be behind it, and the whole of the continent is their potential market. To anticipate a frequently asked question, we think “our next Echostar”, is Echostar.
The Jacobs family, founders and vigorous management at Qualcomm, have been trying to give the Echostar team a run for their money, and through time they just may do it. Last quarter we wrote to you about our visit to San Diego where they put on a show displaying a telephone slightly bigger than the smallest ones extant, that can double as your internet access appliance (that’s “computer” to most of us) and Palm Pilot beside. Qualcomm has a patent position that promises royalties from every corner of the globe, when all of us are simultaneously talking to the rest of us by the end of the next decade. As Qualcomm moves further away from manufacturing anything, and closer to being the toll taker on other people’s manufacturing efforts, the earnings expand rapidly and the quality of those earnings expands apace. That’s fun, and Wall Street has spent the last ninety days cottoning to it.
We continue to be amazed at the number of quality income producing equities there are going begging, and we suspect every other week or so you will find one turning up in your portfolio through the end of the year.
Sincerely yours,
Edwin A. Levy
Michael J. Harkins