Lessons from My Friend Gerry Frigon
As a gauge and guide to the financial fate of Gilder paradigms over the years, from Microcosm and Telecosm to the Israel Test, nearly all my California trips include a visit to the hillside home of Gerry and Karen Frigon in the rolling wine country in Paso Robles.
Hey, I get to drink exquisite local Zinfandels, enjoy simpatico views of politics and technology, and do long runs down dirt roads along Dover Canyon — through farms and vineyards. And the Roman Catholic Frigon family is as close as I can get to Israel in the United States.
Halfway between my usual West Coast stops in Hollywood and Silicon Valley in San Luis Obispo, Frigon runs the extraordinary mutual fund Taylor-Frigon (TFCGX). Thirty percent of the fund pursues his lucrative Israeli Innovation Strategy.
So far this year, while the S&P languishes at 0.89%, TFCGX is up 33.5% and his unique Israeli Strategy is up 49%, pushing the performance of his small but savvy fund into the top 1% of all US mutual funds.
Among his leading performers is Israel-based Audiocodes (AUDC), the source of much of the unified communications software that makes such applications as Microsoft Teams and Zoom so seductive.
As Shabtai Adlesberg reported in his conference call on Tuesday: “Between February 17 to June 14 this year, Microsoft Teams use grew almost 900% while Zoom has grown 680%.
“More data points from a Globus study of more than 545 organization found that 91% of the organizations now support work from home up from 63% prior to the pandemic, and at the level of workforce 72% are now home based compared to just 34% before the pandemic.”
Developing voice over IP technology and now Unified Communications as a service tools for decades, the nimble Israeli company was clearly in the right spot for the viral new mania. But the move toward many-faceted ubiquitous business communications is unlikely to end soon.
Ascendant too in the Taylor Frigon Israeli strategy is Compugen (CGEN), with its unique exploitation of the information theory of biology to design pharmaceuticals.
Less resplendent at the moment — but positioned for the future as the leading analog and mixed signal wafer fabrication and design company — is TowerJazz semiconductor (TSEM), which commands a portfolio of foundries from Texas and Newport Beach, CA, to Japan and Migdal Haemek, Israel. Although it does not compete in the leading edge 5 nanometer processes pioneered by TSMC in Taiwan, TSEM is a virtuoso of complex silicon germanium and other exotic chips that will play key roles in advanced wireless networks and internet of things applications.
Frigon also makes personal investments in such private companies as Otoy in Los Angeles, a collaborator with Ari Emanuel in Hollywood special effects and three-dimensional Virtual Reality (VR) and Augmented Reality (AR) with companies such as Facebook and Apple. Its OCTANE rendering technology is becoming an industry standard. You can read about Otoy in Life After Google.
In Israel, Gerry serves on the board of ASOCS, a private pioneer of enterprise 5G wireless systems for campuses, malls, stadia, hospitals, factories, and other defined domains. It is collaborating with Inventec in Taiwan to build the first industrial 5G network. (I led the founder-funding of both Otoy and the second coming of ASOCS and am Chairman of ASOCS Advisory Board.)
But his rapport doesn’t stop there…
The Investment Hustle
Supremely an investor rather than a mere speculator, Gerry deeply investigates his companies around the world, serves on the boards of some, and shuns the temptations of trading.
Frigon has become a trenchant critic of what I call the “outsider trading scandal,” the Security and Exchange Commission’s (SEC’s) bizarre insider-trading rules that all too often can be translated as “don’t invest in anything you know about.”
Intimidating investment funds from performing real research, this regime has led to an ever-increasing share of the market being held by index funds and exchange-traded funds (ETFs) that own all the companies in a category, and do no valuable research at all.
These computerized trading strategies debauch the markets with their arbitrage and automated fast-trading techniques that perform front-running acrobatics that would be illegal if performed by humans rather than by algorithms.
Knowing nothing and shunting their decision-making to machines, these investment funds can shield themselves from insider trading pettifogs who have yet to indict a computer. The SEC’s computers identify their targets by anomalous results or upside surprises that reveal actual inside knowledge, nearly always legal, of companies and their technologies. The SEC beadles stultify markets by deterring investors from doing the deep research on companies that is essential to all real investment and economic progress.
Since in my information theory of economics, all wealth is essentially knowledge and growth is learning — the index and computerized trading funds that dominate Wall Street are actually anti-wealth and anti-growth.
Worse, many of the residual funds that actually perform research are “all sicklied o’er by a pale cast of green goo.” These are the sanctimonious hustlers of ESG (Environmental, Sustainability, and Governance as I recall) who distract companies with climate change twaddle and diversity politics.
If you don’t know about the climate change investment hustle, you have not been paying attention. Diversity means removing board members who know about the company and invest in it and replacing them with fashion-plate lawyers and accountants. Many of them are nice people, but their chief appeal to companies is their bodies. Most of them waste boardroom and executive time across the country with politically correct and professional platitudes.
Hey, don’t blame Frigon for my views on gender politics. I’ve been on to this scam since 1970. But there in Paso Robles his performance represents a telling rebuke to the increasing debauchery of American markets, with the extinction of most small company IPOs and the overall shrinkage of the number of public companies by more than 50% in 20 years.
This prophecy pursues a strategy similar to Frigon’s, with regular trips to Israel to savor the incandescent startup culture in that country and uncovering other unnoticed investment jewels around the globe. Although it is not popular to point it out, contemporary technology depends on reaching the best talent around the world. To win in this era, you have to be a world champion like Gerry.
Editor, Gilder’s Daily Prophecy