Getty, The Stock Market, and Warren Buffett

I've been around business for some time. One of the refrains I've heard often is to invest in what you know. Stories abound about people who invest in companies they know, and that do well. Maybe it's the consistent positive customer experience a trucker gets at a donut shop that tells them that is a company worth investing in. Maybe it's someone who knows about how a trucking school closing will impact newly minted truckers in the south that will haul fruit in the coming months, and thus, selling short Del Monte stocks. Invest in what you know is a common refrain.

Many people can tell me that the Getty Images "roll-up" is just what the stock photography industry needed. What Getty really needed to do was remain private, as Corbis has done, and not be beholden to the stock market.

(Continued after the Jump)

What I didn't expect, yesterday at the close, while preparing this post, was to see Getty (NYSE: Stock: GYI) close and hit at yet another 52-week low - this time, $23.17. So, with this in mind, I've decided to bring back my JDK Resignation Watch ticker on the right. I'll expect to see him leave shortly after GYI drops below $20, which it's bound to do soon.

While reading about Warren Buffett yesterday, I came across some other worthwhile quotes that apply here, and perhaps might be worth reading, as it pertains to Getty.

Assuming for a minute that Jonathan Klein actually is brilliant, Buffett says:

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." -- W.B.

I can tell you that the stock photo business has certainly had a reputation for bad economics!

"If a business does well, the stock eventually follows." -- W.B.

That seems to be happening right now - that is, the contrary circumstances to this sentiment.

"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently. " -- W.B.

Hello? istockphoto and $49 deal!

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. " -- W.B.

istockphoto is losing GYI money, with losses covered by Getty Images.

"Your premium brand had better be delivering something special, or it's not going to get the business. " -- W.B.

Getty Images is not getting the business, istockphoto is. Klien's own statements have evidenced this, as well as our own research into searches like "white house" (August 4th, 2007 - I told you so? No, not really. (Well, maybe, sort of)), and so forth.

I'd guess, from these quotes, Warren would look at Getty as a "sell", and get out while he could.
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Disclaimer: I have not in the past, do not now, and have no plans in the future, to hold GYI.

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