Wednesday, October 29, 2008

Rise of Venture Capital has changed the Innovation landscape

Today, over 64% of all technology is sourced from outside the enterprise, up from 24% in the 1980s - this according to the latest white paper from Synchrony venture management, a leading think tank on Innovation Capital.

What is Innovation Capital?

According to Synchrony, it is the use of corporate venture investment to create new opportunities and options:
• Attract high-value options through investment and interaction
• Generate two-way value through complimentary assets
• Establish game-changing portfolios of innovation assets that create new opportunities
and competitive advantage

Synchrony believes that fundamental "structural changes and the constant flow of innovative venture-backed firms represent a huge opportunity for savvy, forward-looking corporations."

Synchrony has established a new practice and platform that helps mid-market companies innovate faster, better and cheaper by enabling corporate venture capital as a fundamental external innovation option.

I recommend reading the attached whitepaper, and learning more about Synchrony.

Thursday, October 23, 2008

Innovator Apple grows strong on surging iPhone demand

Apple profits are up 26% on iPhone boom. Apple shares were up 14% in after hours after Apple announced the earnings report. IIG is in excellent shape with Apple!

The best part of Apple earnings: CEO Steve Jobs attended the earnings call (which is quite rare), and had this to say:

Earnings Call: Jobs Says iPhone Revs Total $4.6B, Making Apple The Third-Largest Handset Maker

Apple (NasdaqGS: AAPL - News) CEO Steve Jobs made a special guest appearance on the company's earnings call to brag about the iPhone's stellar fourth-quarter performance, and to give his two-cents on how the consumer-electronics and computer company will be affected by the economic crisis as we head into the holiday shopping season. First, Apple's CFO Peter Oppenheimer explained Apple's new practice going forward of reporting non-GAAP financial results. Because the iPhone and Apple TV may provide free updates in the future, they are forced to spread out revenues for the devices over their lifetimes. Going forward, Apple will also report a non-GAAP financial measure that allows people to see how well the iPhone and Apple sales are currently doing. Under this new form of reporting, Oppenheimer said adjusted sales totaled $11.7 billion, or about $3.8 billion higher than its reported revenue, and adjusted net income was $2.4 billion, jumping by $1.3 billion than reported net income. "We believe this adds transparency to our business, and is helpful to you." Oppenheimer said because of the uncertainty in the market, they are going to be prudent in predicting results for the September quarter. He said Apple is targeting revenue of $9 to $10 billion and earnings per share between $1.06 and $1.35.

In a rare appearance, Steve Jobs joined the conference call to provide his outlook on the economy and detail the iPhone's Q4 performance. Jobs: "There's some remarkable things happening at Apple, but now it's all being done in front of the back drop of the economic global slowdown." Notes from the call, as reported by PaidContent.org :

-- On iPhone growth: Using the non-GAAP figures, Jobs said in the past quarter, the iPhone business has grown to $4.6 billion, representing 39 percent of Apple's overall revenues. "Clearly, it's too big for Apple or investors to ignore. The non-GAAP results are truly stunning." He said adjusted sales for the quarter are 48 percent higher than GAAP sales, and adjusted net income is 115 percent higher than reported net income. "It's more than double than reported net income...If this isn't stunning than I don't know what is, and it's all because of the success of the iPhone 3G."

-- On volume: Jobs said by selling 6.9 million iPhones during the quarter, Apple was able to beat RIM (NasdaqGS: RIMM - News), which sold 6.1 million Blackberry devices. "Apple outsold RIM last quarter. This is a milestone," considering Apple has only been in the market for 15 months.

-- Ranking by revenues: Jobs now claims that by revenues, Apple is the third largest mobile phone supplier in the world. Nokia (NYSE: NOK - News), is No. 1 at $12.7 billion; Samsung is No. 2 at $5.98 billion; Apple is No. 3 at $4.6 billion; Sony (NYSE: SNE - News) Ericsson (NasdaqGS: ERIC - News) is No. 4 at $4.2 billion; LG (SEO: 066570), No. 5, at $3.4 billion; Motorola (NYSE: MOT - News), No. 6, at $3.2 billion and RIM, No. 7, at $2.1 billion. "It's pretty amazing," but Jobs cautioned that they were able to sell that many by increasing the number of countries to 51 from 6, and that it's unclear if they can sustain that pace.

-- On the App Store: Jobs said tomorrow they will achieve the 200 millionth download from the App store after being available for only 102 days. "This is one area where we have completely changed the value proposition for mobile devices...We've never seen anything like this." Today, the App store has roughly 5,500 apps, which are being distributed in 62 countries. "Competitors are scrambling to copy our app store."

-- On the economy: Jobs told analysts and press on the call that they believe they will do fine because they have have good customers, good products, good employees, and $25 billion in cash and zero debt. Jobs: We will increase our R&D investments because they created some of the best products in the last downturn. "It is an extraordinary opportunity for companies that have the cash."

Apple shipped 2,611,000 Macintosh(R) computers during the quarter, representing 21 percent unit growth and 17 percent revenue growth over the year-ago quarter. The Company sold 11,052,000 iPods during the quarter, representing eight percent unit growth and three percent revenue growth over the year-ago quarter. Quarterly iPhone units sold were 6,892,000 compared to 1,119,000 in the year-ago-quarter.

Bottomline:
Apple revenue are up 27% and earnings are up 27% from prior year. Gross margin was 34.7 percent, up from 33.6 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter's revenue. Traditionally, the last quarter of the year is Apple's best quarter. Considering the current economic downturn, even with a 20% conservative revenue and earnings growth, Apple will deliver $11.5 billion in revenue, and $1.89 billion in earnings; however, Apple is only providing guidance of $9 billion to $10 billion in revenue, and a broad range in earnings. Apple is definitely "low-balling" the guidance because of the current economy. Apple iPhone is a money making machine, and the iPhone will have even a greater impact on the earnings and revenue for the next quarter owing to Apple's accounting. Expect Apple to deliver another strong quarter, unless the economy completely unbuckles. Innovation Index Group has a BUY rating on Apple, and has a 12 month price target in the range of $160 to $190.

Innovation Index Reports

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007 based on performance model, and would have returned 174% over the previous five years (2002-2006) based on historical model*. This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.*

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NASDAQ: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.
*Past Performance Does Not Guarantee Future Results



Innovator Google is still growing strong

Google delivered big this week!! And so did IBM earlier in the week. Apple is next and P&G to follow... our innovators are growing strong in tough economy. When the going gets tough, the tough get going! Google shares were up after earnings release!!

In a separate story, Warren Buffett came out telling everyone to BUY for the long-term:

Buffett's optimism is based primarily on the following:

  • "Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."
  • Cash is trash. "Today people who hold cash equivalents feel comfortable," he writes. "They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

Here is an analysis on Google and IBM:

Google Inc., owner of the most popular Internet search engine, advanced in Nasdaq trading after reporting profit that topped analysts' estimates, saying customers are still buying Web ads even as the economy slows. (Bloomberg reference)

While advertisers of home and auto loans cut back, makers of apparel and appliances kept spending, Chief Financial Officer Patrick Pichette said. Consumers continue to shop online, he said, with clicks on ads climbing 18 percent, near the previous quarter's 19 percent growth.

Google results, combined with better-than-anticipated reports from International Business Machines Corp. cheered investors after a decline in technology shares this month. Google showed resilience in a weakening economy, said Mark May, an analyst at Needham & Co. in New York.

``This really shows we need to give them the benefit of the doubt,'' said May, who recommends buying the shares (of Google). ``They should be able to weather the storm fairly well.''

Google's third-quarter net income rose 26 percent to $1.35 billion, or $4.24 a share, from $1.07 billion, or $3.38, a year earlier. Leaving out costs such as stock-based compensation, profit was $4.92 a share, beating the $4.75 average estimate of analysts in a Bloomberg survey.

Google, based in Mountain View, California, rose $18.03, or 5.1 percent, to $371.05 on the Nasdaq Stock Market at 9:50 a.m. New York time, after earlier reaching $378.97. The shares had dropped 49 percent this year before today.

Advertising Shift

Advertisers are cutting back on TV and print media spending in favor of ads that run alongside search listings. The Internet will account for 8.7 percent of the $284 billion in U.S. ad spending this year, up from 7.2 percent in 2007, according to Barclays Capital.

Excluding revenue passed on to partner sites, Google's sales expanded to $4.04 billion last quarter. Total revenue climbed 31 percent to $5.54 billion.

At least eight analysts had reduced their estimates for Google's third quarter this month after the global credit crisis erupted. That made it easier for the company to beat the average profit estimates yesterday.

``This was exactly the kind of shot in the arm that investors need,'' said Jeff Lindsay, an analyst with Sanford C. Bernstein & Co. in New York. ``People lost a lot of faith in the Internet, but this is exactly what the doctor ordered.''

New Contracts

IBM, based in Armonk, New York, said yesterday it signed $12.7 billion in contracts last quarter, topping the estimate of as much as $11 billion from Cowen & Co. analyst Louis Miscioscia. Winning contracts with the Royal Dutch Navy and Bristol-Myers Squibb Co. boosted the total.

``Tech is going to continue to be challenged for a period of time,'' Miscioscia, who has a neutral rating on IBM shares, said in an interview. ``To put this in perspective, IBM is up $2 after market, not $10, after falling about $20 since Oct. 1.''

Google handled 63 percent of U.S. online searches in August, double the market share of Yahoo! Inc. and Microsoft Corp. combined. That dominance has helped the company command higher prices for ads, according to Yahoo, which is awaiting government approval of an agreement to let Google sell some ads on its sites.

Cutting Back

Still, Google has reduced expenses by slowing its hiring rate and spending less on travel and events, said co-founder Sergey Brin.

``We don't know exactly what the future holds. We've taken a conservative approach,'' Brin said in an interview. ``We view this as an opportunity to refine our company and sharpen it.''

Capital expenditures fell to $452 million, down 18 percent from a year earlier, as Google made more efficient use of its computing centers, Brin said. He said he couldn't forecast whether the costs would continue to fall.

The credit crisis may cost the Internet ad market $6.7 billion in lost sales through 2010, according to Collins Stewart Plc. Big and small businesses, from General Motors Corp. to Simplexity LLC, are reducing ad spending plans, while some financial companies, such as Wachovia Corp., have disappeared.

Slower Growth?

The reductions will push down growth in U.S. Internet ad spending to less than 20 percent next year for the first time since 2002, said Sandeep Aggarwal, a Collins Stewart analyst in San Francisco. Advertisers will scale back spending on newspapers and broadcast TV networks, his firm said this month.

``Advertisers stay with the Internet because it's the way to reach the key younger demographic and that's what advertisers are really after,'' Timothy Ghriskey, chief investment officer at Solaris Asset Management LLC, said in an interview from Bedford Hills, New York.

Google, which gets almost all its revenue from Internet searches, is developing ways to advertise with images and video. The company struck a deal this month to show full-length programs from CBS Corp. on its YouTube site, splitting ad revenue with the network.

``The economic situation is so fluid that we're all sort of in uncharted territory,'' Chief Executive Officer Eric Schmidt said yesterday on a conference call. ``We've always been in this for the long term, and we believe that's even more important today than ever.''

Bottomline:
Google perhaps has the best business model - best of both worlds - when times are tough, and the economy is recessionary, advertisers market on Google and other search engines because they offer better value, better tracking and tighter budget controls. On the other hand, when the economy does improve, more advertisers will market more on Google because they simply have more money to spend. The only question is the rate of growth. But if Google can maintain 20% or better earnings and revenue growth in these trying times, this is simply remarkable. Innovation Index Group is long on Google, and is setting a revised target of $500 in 12 months.

Innovation Index Reports

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007 based on performance model, and would have returned 174% over the previous five years (2002-2006) based on historical model*. This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.*

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NASDAQ: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.
*Past Performance Does Not Guarantee Future Results


References:

Bloomberg story reported by: Crayton Harrison in Dallas at tharrison5@bloomberg.net; Lauren Berry in New York at lberry4@bloomberg.net

Thursday, October 16, 2008

Top Innovators Weathering the Financial Storm

HEWLETT-PACKARD

only FOR WOMEN: Fashion designer Vivienne Tam flanked by President (PSG), Hewlett-Packard India, Ravi Swaminathan (left), and Senior Vice-President Global Marketing, Hewlett Packard, Satjiv S. Chahil

Hewlett-Packard unveiled four new laptops, including a special edition stylish notebook PC designed by U.S.-based renowned fashion designer Vivienne Tam. HP has about 33 percent market share in India's laptop segment.

Addressing a press conference here, HP's Senior Vice-President (Global Marketing) of Personal Systems Group (PSG) Satjiv S. Chahil said: "We continuously work to ensure that our HP Pavilion line appeals to new markets and segments. Vivienne's fresh and authentic design speaks to an intrinsic part of a digital lifestyle-personal expression." According to HP India's President (PSG) Ravi Swaminathan, the company plans to strengthen its market leadership position with an aggressive 'go-to-market' strategy by increasing its retail footprint across 650 cities and expanding retail partner network to over 10,000 by this year-end.

HP Vice President in an interview today on CNBC indicated that HP PC business remains robust, and touted Gartner report that shows growth of at least 15%.

HP shares are down 23.5% year to date. Innovation Index Group has a BUY recommendation on HP with a 12 month price target of $50 to $60.

PROCTOR & GAMBLE

Mr. A.G. Lafley, CEO of P&G, said: "The reason P&G has grown so consistently for so long is that we're a company that sticks to the fundamentals. We build brands that improve consumers' lives. We deliver superior value day in and day out. We manage cash and costs with unrelenting discipline. And we invest in innovation as the primary driver of profitable organic sales growth.
"While the economic environment remains volatile and uncertain, I am confident that P&G can and will continue to prosper over the long term. We are committed to ensuring P&G will continue to be a company you can count on."

P&G's net sales for the fiscal year ended June 30, 2008 increased nine percent to $83.5 billion, with organic sales up five percent - in the middle of the Company's four to six percent target range. Diluted earnings per share were $3.64, up 20 percent - or double the Company's ten percent target. P&G's free cash flow was $13.0 billion for the fiscal year, or 106 percent of net earnings - well above the Company's 90 percent goal.

P&G sales have nearly doubled for each of the past three decades - from $10 billion in 1980 to more than $80 billion today with earnings growth increasing from $640 million to $12 billion over the same period. Over the past five years, P&G has delivered 11 percent compound annual total return to shareholders, nine percent over the past ten years, and 16 percent over the past 20 years. The Company's dividends have also increased every year - more than nine percent a year, on average - over the past fifty-two years, and have been paid without interruption since the Company was incorporated 118 years ago. P&G recently announced a 40 cents dividend.

P&G shares are down 15.8% year to date. Innovation Index Group has a BUY recommendation on P&G with a 12 month price target of $75 to $85

APPLE

JP Morgan is upgrading Apple to Overweight from Neutral. Apple's model is far more diverse than previous vintages, and they think the staying power has been underappreciated. With its market share momentum likely intact, Apple in firm's view offers strong relative downside protection to the looming earnings reset that they expect to impact IT Hardware companies in coming weeks and again early next year.

- Diverse model provides staying power. There has been considerable investor concern lately over the Apple model losing steam, particularly if the consumer vertical rolls over. JPM estimates that the company's total model exposure is about 70-75% consumer, but they think that Apple's brand and market share momentum offer meaningful buffers to potential macro-driven pressures on the consumer.

- Retail expansion could sustain share gains and international momentum. JPM thinks a major force behind Apple's growth story will be its diversifying revenue streams. They expect Apple's penetration of the international markets to be measured in years and supported by the increasing build-out of the retail stores overseas.

- iPhone could lead to the enterprise or other content-rich devices. Firm thinks the iPhone could be a stepping stone to penetrating the enterprise. Also, they could envision the iPhone pushing Apple deeper into the set-top box market as the convergence of voice, web, data, and content continues.

- Expect numbers to come down across the sector, but Apple likely has a backstop beyond the first round. For Apple, they are revising their below-consensus revenue and EPS estimates. Looking to fiscal 2009, revenue and EPS estimates are $36.98 billion and $5.27, versus the Street consensus of $40.26 billion and $6.02.

- Apple trades at 18.8x JPM's calendar 2009 EPS estimate, versus the peer group average of 11.1x. With macro pressures showing no signs of dissipating, they believe it is time to play defense, and they think Apple can avoid having a major problem with the "E" in the price-to-earnings multiple moving through the coming year. Firm expects the company's model to limit a series of major earnings cuts from unfolding in coming quarters, and they think this should support a valuation gap in Apple's favor.

Apple announced new aluminum shell, more powerful laptops on October 14, and reduced the price on updated laptops to under $1,000. Apple is poised to see a robust growth in its sale of notebooks during the holiday season owing to competitive pricing and better features.

Apple shares are down 48.6% year to date. Innovation Index Group has a BUY rating on Apple, and is now updating the 12 month price target in the range of $160 to $190.

IBM

JPMorgan upgrades IBM as a stock that is a 'sturdy ship' in rough economic waters

A JPMorgan analyst upgraded International Business Machines Corp. saying the company's diverse and steady revenue streams make the stock a "sturdy ship" in the worsening economic environment, the firm said Wednesday.

Mark Moskowitz raised his rating to "Overweight" from "Neutral" because IBM has diverse revenue sources that offer relative stability. He also said at least half of the company's revenue comes from annual payments on long-term services and software contracts.

IBM represents a "flight to quality" for investors" due to its broad services, hardware and software reach," the analyst wrote. IBM 3Q profits jumped 20% from last year in large part due to services contracts.

IBM shares are down 15.3% year to date. Innovation Index Group has a BUY recommendation on IBM with a 12 month price target of $125 to $150.

These four innovators present attractive buying opportunity at the current price points.

Innovation Index Reports

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007 based on performance model, and would have returned 174% over the previous five years (2002-2006) based on historical model*. This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.*

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NASDAQ: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.
*Past Performance Does Not Guarantee Future Results

Monday, October 13, 2008

U.S. Stock Markets Make Historical Jump

Dow Jones gains 936.42 points in one day, the biggest single day jump, a rise of 11.08%. The S&P 500 climbs 104.10 points, or 11.6%, to 1,003.32, the S&P's largest daily point jump. The Nasdaq Composite amasses 194.74 points, or 11.8%, to 1,844.25, the third-greatest percentage rise.

The Innovation Index Fund gains 30% in one day, the largest percentage increase in one day.

What is in store for tomorrow? Can the markets continue this rally?

Our outlook is that the U.S. stock markets will rebound further post November elections and post November options expiration. Whether they would finish the year in the positive remains to be seen.

Innovation Index Reports

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007 based on performance model, and would have returned 174% over the previous five years (2002-2006) based on historical model*. This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.*

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NASDAQ: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.
*Past Performance Does Not Guarantee Future Results

Sunday, October 12, 2008

Statement of IIG Financial Condition - Innovation Index Group

Dear Current and Prospective IIG Investors:

Some of you may have thought about the financial condition of IIG (Innovation Index Group) and my personal financial condition, especially in this current economic climate. Rest assured, I have worked hard for 10 years in Silicon Valley, and through the options in various company stocks that I worked at and that we gained, and smart investments in the stock markets and through the equity we built in our Fremont home that we sold last year, we have amassed enough savings to last us another five to ten years at the very least. We also bought a house this summer in Turtle Rock. We are blessed and lucky to be in this position. Having said that, it behooves us to work hard to continue this growth and not just deplete our savings, and to that end, I am planning to become a CFP next year and open a full-blown independent investment practice, and my wife has also begun working full-time. We have done well, and have no plans to retire in our forties... perhaps in our fifties ;-) And on a separate note, we are mentally healthy too, and plan to stay that way for the rest of our lives ;-) We do many things to relax and enjoy each weekend and during the week.

So, if you are considering investing in the stock market or real estate, please consider IIG - Innovation Index Group and REIG - Real Estate Investing Group (newly launched) as your consistent partner for steady growth over the next five to ten years and beyond. Invest with Confidence and Grow your Wealth...

I am thankful and grateful to my partners in IIG and REIG, and all our friends, family members, and partners for your continuous support and belief.

Sincere regards,
Sanjay Dalal
President & Managing Director
October 12, 2008

*Past performance does not guarantee future results. Refer to Innovation Index Fund and Real Estate Investing Group Prospectus for full details

Friday, October 10, 2008

Rotary Club of Newport-Irvine Induction Speech by Sanjay Dalal, President and Managing Director, Innovation Index Group

October 9, 2008

I am indeed honored to become the newest member of Rotary Newport-Irvine Club today. Thank you President Jerry, Angelita, Rotarians, members and the executive team!! Our family has a deep appreciation for Rotary and Rotary foundation – my father, who is a very proud Rotarian, and proud of me becoming a Rotarian – came to U.S.A. in 1957 with a Rotary Foundation Scholarship, and obtained his MBA from Stanford Business School. If he had not come to the States, who knows? I may not be here in front of you today. Exactly 30 years hence, in 1987, I came to America. Thank you Dad and Mom for sending me here for education and our success.

A little about me... I am not right wing, nor left wing... nor affiliated with any political wings. I just became a U.S. Citizen. I have a question for the audience: What is the most important right of a U.S. citizen? (right to vote)

What I am though is a married family man, raising two wonderful kids, participating in many local activities including basketball coaching, art master, school site council and more. And yes, my business is all about determining the fundamentals of companies whose stocks we invest in.

I am proud of my heritage, my parent country India, the world’s largest democracy. It is a great privilege that my family and I live in America, our home, the world’s greatest democracy, a country of tremendous opportunity and pioneering spirit.

I want to thank my wife, for raising two wonderful children, and who has stood by me through thick and thin over so many years.

Today, in LA County alone, we have tens of thousands of kids who live in foster families. There are more than 600 children currently waiting for an adoptive family. I invite the Rotarians to contribute your time and money to help these children through the KidSave organization based in Los Angeles.

My wife and I have sponsored a child in India for the past many years through Christian Children’s Fund. He lives in Jharkhand state. He is a growing kid, and when we got a letter from him where he talks about, I quote, “the Save Environment program in Jharkhand where the main objective is inhibition on hunting because life is the right of animal” end quote, it really moved us.

Over the years, we have donated our time and money to many charities including USO, Big Brothers and Big Sisters, Salvation Army, Free Wheel Chair Mission, Fire Fighters, Police and Sheriff organizations, Hurricane Katrina, Tsunami Relief, China Earthquake, Myanmar Floods, BAPS and more.

Last week, at the local Jain Center, thousands of Jains celebrated the opening of new temple, and asked for forgiveness. My wife is a Jain, and we follow the principles of non-violence, peace, honesty and kindness.

I want to take this opportunity to thank America, our home, for helping us grow and flourish, and letting us enjoy the free spirit and democratic ideals.

We, all of us, are quite blessed by God. Let us take a moment to thank our parents, our family, our friends, our colleagues at work, our partners, our neighbors, our community and our country. We work hard, and most of us have a nice house to live, drive good cars, do not have to worry about food, are healthy (best wishes for Brady) and do well financially. So, let us make a promise to ourselves today: We must not complain.

God Bless Us All and God Bless America...

Sanjay Dalal
New Rotarian
Learn more: http://www.sanjaydalal.com

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