          
| "Learn from, but do not live in the past. Live in, but do not live for the present. Live for, but do not try to learn from the future." The SDW Story The humble beginnings of the SDW fund start in the summer of 1999 when Kendall Shen and Henry Sun consider investing in the futures market with hopes of profiting. Later, in Se Saying that the SDW Fund has been volatile is a gross understatement, as apparent from our performance chart. To summarize, the SDW made an incredible run from its first trade in October 1999 until March 2000, hitting a return of 151% in 5 months, an obscenely high figure. During this time, the SDW added 13 new investors and over $7000 in new capital. The profits came quick and often with successes such as gaining 76% ($1520 on 20 shares) in Emulex (EMLX) in two and a half months and 32% ($1090 on 27 shares) in Puma Tech (PUMA) in a week. At its peak, the SDW owned six stocks and had a market cap of over $20,000. However, the biotech correction in early March, with the SDW losing 43% ($1960) in Millenium Pharmaceuticals (MLNM) marked the end of the "golden age." The ensuing correction in the Nasdaq further crippled the SDW, even handing the original investors losses. However, April marked a turning point for the SDW, as evident through this email that Kendall sent when the fund was in its especially trying stages:
Greetings, fellow investors; if you
care about your invested capital, please read:
The SDW Fund has witnessed a
major infrastructure overhaul in the past two weeks. I have been
especially humbled by the recent market correction as well as the major downturn
in our share price and because of these factors, have changed the
basis of my investing techniques. Admittedly, numerous past
investments have been haphazard gambles. Some, but no
signifcant care was minded to exactly what the company did, it's future
revenues, competitors, cash available, current earnings, nor PE Ratio.
Digital Island is a company which immediately springs into mind. One
may ask exactly why I select companies which may not be first or
second tier. This is due to short term benefit. Though long term I
would never dare hold Digital Island, short term upside, through chart
analysis looked very promising. However, when the market
melts down, any sort of chart analysis must be thrown out the window
and companies are truly put through the legitimacy test. Unfortunately,
Digital Island was far overvalued; it may in fact, be eatened alive in
the future by larger, more established competitors such as Akami, Inktomi,
Exodus, AT&T, Qwest, and MCI Worldcom. This leads to my main point.
The SDW will now only invest in leading companies or definite
high-growth fledglings of a particular industry. Prime importance
will be put on valuation, future growth prospectus, and current standing
in the industry, all the fundamentals of smart investing. Buying
companies in shaky, unestablished industries such as with Liberate Tech.
or paying too much for a company (Puma at 190, Millenium at 250) will be
eliminated.
Charts have not been completely washed
from the scene however. They are still my bread and butter. Just
over one month ago, our share price was $2.52. The reason for this was
mainly due to chart analysis. Even with strong companies, I will sell at
what I think are peaks and buy again later when they show weakness.
Synonymous with this change will be informing
you, my customer, about WHY I chose a particular company. Because
I am required to disclose this information, it prevents me from gambling
on little-known or unestablished companies. I will also keep you more
informed by letting you know of any particular stocks high on my
"radar" as potential buys, long or short term and any strategies I
have in mind.
Amazingly, I have received very
little complaint stemming from recent performance (except the occasional
"Go to Hell" from one Mr. Bill Gates), but hopefully, this message
will reinstill any confidence lost. Again, I am open to any stock
picks or suggestions; just be sure to have strong fundamentals to back
them. Thanks again for investing. To close, I foresee share
price back again at $2.52 by the end of our fiscal year (October 6,
2000).
With these tidings, the SDW witnessed a rebirth. We established the 3VR System (see the "Mission" section for further details), drastically improving our method of investing. The past 4 months have seen the fund in a range between $0.83 and $1.11, explainable by nothing other than ill fortune. Three stocks we purchased, AMZN, ASYT, and VIGN all tumbled the day of or day after purchase because of negative analyst comments, rumors, and an acquisition, respectively. Though $2.52 by the end of the fiscal year is by no means any longer realistic, we are striving for $1.30, a solid gain for a year where stocks flew to new highs yet plummeted in an unexpected, most destructive fashion. One thing remains certain: no matter where technology goes and what turns the market may take, the SDW will be there to capitalize.
Quarterly Reports Every three months, we attempt to publish a quarterly report detailing performance and progress of the fund. Here are archives of the reports. You must have Microsoft Publisher to view. If you do not have MS Publisher and wish to receive a copy of the first quarterly report, contact either Matt or Kendall.
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