This link is probably relevant to quite a few here:
moneycentral.msn.com
The law of diminishing returns holds that as a company gets bigger and bigger, its growth must slow because at some point, size stops producing efficiency and instead produces inefficiencies. But in technology, as companies like Intel (INTC, news, msgs), MSN MoneyCentral publisher Microsoft (MSFT, news, msgs) and Cisco Systems show, size may actually produce increasing returns. A company that can become big enough to be the de facto standard in an industry or segment of the economy reaps increasing benefits from its size that make it less and less vulnerable to smaller competitors. That thinking has led to a new twist on the traditional advice of "Let your winners run." The new wisdom, explained in books like "The Gorilla Game" by Geoffrey Moore, Paul Johnson and Tom Kippola, says that the way to succeed in investing is to find those few dominant companies, buy them and hang on. As long as a gorilla remains a gorilla, there's certainly no need to sell.
Also:
To me, Cisco Systems is the current gold standard among gorilla companies because its management has a long track record of being able to execute the moves needed to stay on top. Acquisitions don't blow up on Cisco. The sales force integrates new products with a minimum of backstabbing and without confusing turf battles. Management routinely moves to patch holes in the company's product line before competitors can grab an insurmountable lead. I think any gorilla in your portfolio should be measured against Cisco's track record. If management is less experienced at handling acquisitions, if the company's sales force isn't recognized as the best in its industry, if the company hasn't been around long enough to prove that it can recognize and repair holes in its product line, then the quality of the company doesn't justify a huge overweighting in your portfolio. |
