Gorilla investing is at heart Value Investing. Short term price swings occur as momentum takes over temporarily. But, Gorillas are distinct because the risk of their not meeting forward earnings projections are much smaller than for the overall market. (Example: QCOM is projected in Zack's to grow 35% per year for the next 5 years. I am a lot more confident that they will hit their numbers than I would be that LU can hit theirs).
Investors buy the net present value of the stream of future earnings. Value Investors who buy based on favorable Book-to-Price ratios are essentially betting on liquidation of the company (directly or indirectly, and whether they know it or not). Value investors who buy based on PEG, and its relatives or variations, are buying earnings. Gorilla investors are able to look further into the future, with assurance, of what those earnings are going to be.
Investors are a different animal from Traders. Traders operate in a zero-sum game, and on the Greater Fool theory. Momentum Investing is an oxymoron. A momentum player buys in the belief that the stock will continue going up (regardless of fundamentals), and there will be a greater fool out there to buy his shares when he wants to sell. Momentum is short term. It is not investing.
I can buy QCOM at today's price (even if the current PE is a stretch) because I know I'm going to hold it for 5 years (actually, I'm not selling for 10 years, if ever). In 5 years, QCOM's eps will be 5 times 2000's. And it will still be on the same growth path. The PE won't be nearly the stretch, then.
These same arguments can be made, with greater and lesser force, for various other stocks we discuss around here--CSCO, GMST, MSFT, etc. And, these are statements that cannot be made of other techs, such as LU, Alcatel, the internet portals, etc. |
