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Wednesday Dec 13, 2006
The Importance of Due Diligence
By Ian L. CooperWe don’t recommend any stocks or any options without first doing our due diligence. It’s not a smart move -- end of story. And, to be honest, if you’re not doing any due diligence beforehand, you shouldn’t be trading stocks or options.
Take a look at TiVo. TiVo shares spiked yesterday, attracting the investing dollars of naïve investors that thought something was really happening. Reportedly, the run was birthed by a rumor that some unknown company (Cheap TV Spots) would buy TiVo. Immediately after hearing this, any smart investor would have asked, “Who the heck is Cheap TV Spots?” TiVO was asking itself the same thing, as quoted in the New York Post: “Cheap TV Spots? We’ve never even heard of them.”
Even Cheap TV Spots’ CEO found it necessary to diffuse the rumor, saying the company “isn’t planning on buying TiVo… TiVo is actually a better M&A target for Yahoo!, Google or Ask.com.” Even Apple, Microsoft and AOL were mentioned as better buyers of TiVo.
There’s also a rumor that Apple will license TiVo’s patented technology for iTV. As much as we’d love to confirm this rumor, due diligence brought us to the U.S. Patent & Trademark Office, which turned up nothing on Apple’s supposed use of TiVo products. If it were true, it’d sure stir up a lot of attention. But it’s not going to happen.
Due diligence would’ve turned smart investors away from TiVo yesterday. But I’m sure you’re familiar with the saying, “A sucker’s born every minute.”
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