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A Strange Investment To Find In a Pawnshop

By Tom Dyson, publisher, The Palm Beach Letter
Monday, January 23, 2006

George Gruhn didn’t tell us where we were going... he just said he had to run an errand.

This was Nashville on a chilly Friday afternoon. George owns a famous guitar shop in Nashville. He sells vintage guitars.

We’ve talked about George a number of times in the past couple of weeks after both Steve and I invested in a collectible guitar.

But this email has nothing to do with guitars... it’s about lasers.

You see, George was taking us to a pawnshop. He had a broken piece of metal in his pocket and he wanted to see if the pawnshop could fix it. It was an old guitar accessory called a tailpiece. It was snapped clean in two.

George said he was about to throw it out when the pawnshop called. The pawnshop claimed to have a special piece of machinery that could fix broken metal and they wanted to give George a demonstration.

Now, if this were true, it would be a big benefit to George’s business for the following reason:

Much of the guitar shop’s profit comes from buying beaten up guitars, restoring them, and selling them in mint condition to collectors. He employs nine guitar restoration experts. The whole fourth floor of his building is reserved for guitar restoration. He has thousands of instruments under work in progress.

Once repaired, many of these old guitars sell for over $10,000. Quite a few of them sell for over $100,000. Repairing old guitars is big business.

Collectors love original accessories on their guitars. They make a big difference to the final price. If Gruhn could repair this broken but original metal piece using the machine, the finished guitar would fetch a higher price than would otherwise be possible with a replacement tailpiece.

I don’t think George was very confident. Here was a pawnshop offering to fix the broken tailpiece from a vintage Gibson Archtop guitar. It didn’t seem very likely, and even if they could do it, the job would probably be too messy for use on a fine collectible guitar.

But he went along anyway. And he brought us with him.

When we arrived at the shop, the man took the two pieces from George and disappeared into the back of the shop. He came back two minutes later with a beautiful, perfectly restored Gibson tailpiece.

“It’s the new machine I was telling you about,” said the pawnshop manager. “It uses a laser to join metal back together.”

George was so impressed he asked the guy how much they paid for the machine.

“$32,000,” said the manager. “It’s the best money we’ve ever spent. We’ve only had it a few months and it’s already paid for itself several times over. In fact, we’re opening up another branch purely on the business this machine is bringing us.”

I glanced over at Steve. He knew exactly what I was thinking. I asked the manager for the name of the company. “Rofin” he told me.

Rofin, it turns out, is a small-cap German company called Rofin-Sinar Technologies that trades on the Nasdaq under the symbol RSTI. It has a market valuation of $667 million.

Rofin’s machines use lasers to cut, mark, and weld industrial-strength materials. They are found in industries as diverse as diamond authentication to chain welding to medical device manufacturing. They employ 1,400 people in 28 locations worldwide.

“We recently won a large contract with the city police force,” the pawnshop employee said. “We fix their badges. They used to throw their badges away every time the pin broke on the back. We save them a ton of money and that’s just the tip of the iceberg... this machine is the best thing that ever happened to this store.”

Rofin’s stock broke out to an all time-high last week. What does it all mean?

You never know where your next big idea will come from.

Good Investing,

Tom Dyson

Market Notes


Oil Service HOLDRS Trust (OIH)… oil services and equipment
International Game Technology (IGT)… gambling machines
optionsXpress (OXPS)… online broker
Legg Mason (LM)… asset management
Joy Global (JOYG)… contruction and mining equipment
Suncor (SU)… Athabasca oil sands production
Intuitive Surgical (ISRG)… robotic surgery
Quilmes (LQU)… Argentine beer
Commodity Research Bureau Index… commodities
Akamai Technology (AKAM)… internet toll road
Rio Tinto (RTP)… mining giant
Freeport McMoRan (FCX)… copper and gold


Lean hogs
Natural gas
Fresh Del Monte Produce (FDP)… fruits and vegetables
Journal Register (JRC)… newspapers
Nautilus (NLS)… exercise equipment
Dollar General (DG)… stuff for $1
Dana Corp. (DCN)… auto equipment
Overstock (OSTK)… internet retailer

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