Joel,
Before I answer your questions about the time to buy Citrix, I'll give a little background. Cha2 and I participated in a Citrix thread a couple years ago when we wondered about whether or not Citrix was a good buy back then. We had the typical discussions about the high valuations, the dilemma about needing Microsoft as a partner, and wondering whether or not the big picture supported a need for Citrix's product for a long time.
At that time, the one and only reason I bought the stock was because my belief in the big picture was so profound I was willing to accept the risk of depending upon Softie as a partner. Though I hated the valuation (which was half what it is today), I shut my eyes and bought the stock.
Back then, I had no understanding of gorilla-game criteria because the book had not been written.
Now to your questions.
Do you feel it is too early to buy CTXS because it is not in the tornado or is there any other factors.
It's the issue of the tornado. The other factors that bothered me two years ago trouble me less now. The PEG ratio, which stands at 1.8, is not far above the 1.5 fair value I use for potential gorillas (though I thought two years ago it was a valuation beyond my reaching point.) The issue of depending upon Microsoft is less of a concern for me today because I think Citrix is on the brink of depending less and less upon Gates & Co.
Also, if you felt for sure that CTXS was going to be in a tornado, would not now be a good time to take an initial position and then add to it as you see the sequential quarter after quarter growth?
If you're suggesting that taking a partial position in the stock of an enabling product before it enters the tornado lessens the risk, I guess that's one way of looking at it. But I prefer to look only at the invested dollars and wonder if I could find a better risk/reward ratio elsewhere.
I think a better way to lessen the risk is to fully understand the company in terms of the stuff in Inside the Tornado. The book tells us what the executive management team should be doing to get past the bowling alley and into the tornado. If management is doing all those things, that would seem to indicate the kind of reduction in risk that might make me feel better about making a pre-tornado investment. (I'm not sufficiently familiar with the details yet to have an informed opinion about that.) As Moore and the other authors point out in Game, it is inevitable that the more sophisticated investors will work around the rigid rules of gorilla gaming; using his own writing as the basis of a work-around is hardly blasphemy!
If I didn't fully answer your question, try me again. And tell me to concentrate the second time around. :)
--Mike Buckley |
