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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: 100cfm who wrote (22246)4/5/2000 8:16:00 AM
From: Tom Trader  Read Replies (1) of 54805
 
Yes, I liked the lessons that you outlined!

However, I do wonder whether the lessons learned would have been any different had we closed at the lows of the day:)

The two most valuable things that I have learned from this thread are some of the discussions regarding gorilla gaming and a discussion that occurred several weeks ago as to how different individuals were dealing with a serious market down-turn by having sufficient cash resources to see them through several months to several years of expenditures.

I would suggest that the appropriateness of portfolio protection will vary by individual and their emotional capacity to be able to handle significant downswings. For my part, I have dealt with it by maintaining a substantial amount of cash resources to see me through for several years of a market down-turn. But at the very back of mind, I will confess to that slight gnawing doubt as to whether I am likely to be able to stay the course -- hence, my attempts to activate a discussion about portfolio protection.

As far as the ability for gorillas to withstand downward pressure, I not convinced that the recent price action is sufficient to make this case. I will agree that past history seems to demonstrate that gorillas are the most likely to recover fastest when the sell-off is over. I would suggest that the price action that we saw in QCOM and CSCO -- both stocks that I own -- is less to do with their gorilla characteristics and more to do with the fact that neither of the stocks have received the full attention of the momentum crowd, margin buyers and those looking for instant gratification. When QCOM was a momentum stock it got as high as 200 in the pre-market and then gave up almost half its value shortly afterwards. Having owned CSCO for several years, there have been similar exaggerated declines in the stock.

If you want proof that irrationality can cause greatly exaggerated moves in the best of stocks, just take a look at what happened during the 87 crash. I was, even then, active in the markets and the magnitude of the declines were awesome to behold. Yesterday, was the closest that I have seen to that day, with one big difference -- the market never recovered and the selling accelerated in the final hour or so.

But in the ultimate analysis it is a question of "know thy self" -- and how one is likely to react to significant market events.
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