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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Bruce Brown who wrote (25955)	6/7/2000 6:32:00 AM
From: Bruce Brown	Read Replies (2) of 54805

RE: Metrics.... I should have tacked on the criteria for choosing when to think about selling what we call a Rule Maker stock. Here's a link that explains it quite well and mentions the specific problems with Lucent's flow ratio over the past ten quarters while Cisco's improved throughout the same ten quarters: fool.com "The rule of thumb we propose is "Four for Four." That is, a current holding that fails any four of the six quantitative tests for Rule Makers for four consecutive quarters is eligible for sale. This conservative nature recognizes the fact that even the best companies have down quarters, or even down cycles. But poor performance for a full year is reason enough to question the quality of any company, even one we bought intending to hold for decades. For review, the quantitative tests are: * Flow Ratio of 1.25 or lower * Minimum Sales Growth of 10% * Gross Margins of 50%+ * Net Margins of 7%+ * Cash no less than 1.5x total debt * Cash King Margin greater than 10% BB

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