Chaz and the thread in general,
I have been struggling with this problem of investing in proven Gorillas (Uncle Frank's preferred way) vs. investing in potential Gorillas with definite signs of a tornado (Mike's way) vs. investing in potential Gorillas with possibilities of a tornado (apparently Lindy's current favorite method...*smile*)... My apologies if I have in any way been too rigorous in my characterizations of the folks. I am well aware that UF has invested in Cree and Mike has defended Elon, and that Lindy has his biggest investment in Q (an acknowledged Gorilla)...
It has been to the consternation of a few that some companies - ELON, CREE etc. have had such incredible runnups when they were not even in the tornado phase of their product development life cycles and were at best in the bowling alley, and much discussion of how long this could last on other threads. It has been stated that this was, therefore, a risky investment strategy at best, recently most eloquently elucidated by UF (and I endorse his view to the extent that one invests without realizing precisely what it is that is occurring).
It seems to me that we may be missing a point here. If nothing else, I am struggling with this concept but, there are evidently significant gains that are made when there is a perceptual change in a company having crossed the chasm as opposed to its being in the pre chasm phase. The recent significant gains in the share prices of companies such as Cree or Elon may be no more than a recognition of that very fact in the minds of investors. The point that I am making is that these companies were thought to be in the pre chasm phase. Folks here (Unclewest is the prominent person who comes to mind), have correctly perceived that these companies have crossed the chasm but that their valuations do not, as yet perhaps, reflect this status. Thus, they have invested in these companies, and these companies have enjoyed a significant runup as a result of the valuations catching up to enhanced status of the companies in their life cycle.
Now, as to the risks involved, I feel that these may be comparable to companies that are in a tornado, or almost in one and, thus, being a Gorilla. After all, the purpose of this thread and its underlying inherent belief, is that the concerted thought and analysis of the diverse and varied points of view presented herein would be able to perceive, evaluate and crown a Gorilla BEFORE this perception circulated down to the other investors. I put it to you, that in the same way, this thread may be able to postulate that a company has crossed the chasm BEFORE this perception has circulated down to the other investors.
Thus, this notion of the market place rewarding vision etc. is just another facet of the Gorilla game - the reality that there is an evident difference between a company in the pre chasm and a company that has crossed the chasm, and that different valuations must be accorded to each....
I would welcome any input on this particular theory since it has some significant relevance in the stock price movements. As a first, I would postulate that a company that is in the bowling ally but is still perceived to be in the pre chasm phase has significant share price appreciation in front of it till the valuations more or less match the new perceptions. Second, that we have to wait for some time, once the valuations have caught up, till the company makes a further significant move up due to an actual tornado taking place. Now, I do not feel that the risks that are incurred in investing in a company that has the pre chasm - cross chasm, perception gap are significantly higher than a pre tornado - post tornado Gorilla. The significant differences are merely in the time frame involved - i.e. whether one is VERY long term vs. a somewhat shorter term. Although I haven?t as yet made any research into the impact of a general downtrend in the market and its relative impact on the prices of these companies (and I hope that someone can help me out on this), I do not believe that the longer term impact is very relevant. The MOST important factor, once a company has crossed the chasm, is evidently whether it can further evolve into a Gorilla - which requires the formation of a tornado.
Thus, to summarize, there are significant potential rewards in identifying a company that has crossed the chasm BEFORE the general perception catches up to this view - and that this is not much more risky in the shorter term since there should be time to evaluate further developments as and when they occur, and to get out if these developments are NOT taking place, once the valuations have reached a steady state potential of a company in the pre Gorilla- pre tornado phase of development.
Thank you for your time, and allow me to extend my profound thanks to the thread ....
My grateful Regards to all....and I would appreciate your views on this hypothesis... |
