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Allan Feifer
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To Grow or Not to Grow: That is the Question

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Apologies to Shakespeare for my literary license, but allow me to point out that we now live in a kind of post-apocalyptic world where the survivors are suffering to one degree or another from post-traumatic stress disorder. The symptoms are clear to see with individuals and companies guarding their business so closely that they may not realize how isolated and vulnerable to change they have become. Others work themselves to death in an environment of diminished staff and resources, while others have developed the habit of not trusting anything they cannot see, smell or touch. Finally, many more lead lives of quiet desperation waiting for the other shoe to drop and bad things start to happen all over again.

We predicted years ago that a day of reckoning would come with an obviously irrationally exuberant economy inflated by out of control lending policies and people with little or no skin in the game. After several years of saying that and nothing happening, we felt chagrined. When things changed, they changed fast and most of us were unprepared for the consequences. Well, enough of that. That was then, this is now.

We are a Georgia and Southeast centric company. We take a look from the weeds on up and the conditions that exist today are materially different than that which existed some years ago. Could the bottom drop out again? The short answer is “yes.” But, the big boys are betting the other direction. Just take a look at the amount of institutional money that has been dropped on homebuilders stock. The smart money has bet that this “up” market has staying power and that’s where it starts. The stock market is in fact, as some of my friends contend, the largest casino in the world. But let’s not confuse gambling with risk management. Technical investors know that the market moves based on two different vectors. First, there is momentum and second there is perception. When perception meets momentum you have big moves. Some of my friends call that “making the market.”

Let me see if I can make sense of this and why it is important to you. In the 1960’s a penny stock broker called up my Dad with a hot stock tip. Normally, my Father would not take the bait but the stockbroker made an unusual promise. He promised that if the stock did not triple by the end of the week, he’d give my Father his money back. Intrigued but still circumspect, my Dad went ahead and bought a thousand shares at $0.30 a share or $300. A couple of days later the broker congratulates my Dad and says the stock is up to $0.55 with guidance that the stock might hit $2.00. My Father buys 2,500 shares. Guess what, a week later the broker calls back and says the stock is up to $0.95 and climbing. You guessed it, my Father pops for another 5,000 shares. This went on for about another month and the stock was climbing close to that $2.00 mark and Dad now has nearly 30,000 shares and he cleverly decides to exit his position and cash out. He calls the broker and tells him to sell to market. The broker comes back with the following reply that will be forever burned into my memory…”sell to whom?” If you have not caught on by now, my Father constituted much of the market for that penny stock and he had been driving said market with his purchases. As to buyers, there was only him.

For our purposes, this story articulates that we must be both amenable to taking risks, but calculating in assessing those same risks. Why take risks you might ask? The simple answer is that there is no gain without risk. There are trillions of dollars sitting on the sidelines waiting for opportunity to return. Whether you realize it or not, you are in the hunt for some of those dollars. Here are some simple truths I want to share with you today.

1. Most businesses make the greatest amount of money in the first third of an economic recovery. That recovery is underway at the moment.

2. Increased Single-family and Multi-family homebuilding are precursors of other business activity including commercial construction of all kinds. Couple this with improving numbers on the job growth front and you know that we are moving in the right direction.

3. The pursuit of Competitive Advantage is not limited to big companies. Every company, from the humble supplier to the best subs and general contractors, must seek a competitive advantage over their competitors. That advantage is never locked in stone but is fluid and must be updated continually as times and circumstances change.

4. Price pressures are always present. Control of your costs is the bedrock you build your brand and competitive advantage on. Too many people we know lost control of their costs in the last run up. Constantly adjust your cost structure to remain lean and at least somewhat mean.

5. Be great at what you do. You can understand the need to be active in the marketplace, have a great competitive advantage and also control your costs, and still fail because your customers perceive that you cannot deliver on time and with the quality they expect. Never take your eye off the ball when it comes to being great at what you do.

While the above is by no means a comprehensive list of all our Simple Truth’s, if you have control of the above items you are definitely on the top of your game. In the lucky, smart and dedicated department you want to be able to check off “all of the above” before declaring victory. In the final analysis, I hope you agree that we’ve answered the question posed in our title and that you will grow; conservatively, smartly and patiently, but grow nonetheless to cement your position in the marketplace that is ever evolving.

We’re glad you’re reading our blog. Please feel free to contact me with questions, comments or just to let us know what subjects are of interest to you.

Good Selling!

Allan J. Feifer

AllanF@DEC-International.com

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