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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: the dodger who wrote (29467)8/6/2000 5:50:57 PM
From: alburk  Read Replies (2) of 54805
 
This highlights an important point that has been touched upon by Mike Buckley and others--Valuation should not be ignored.

Anyone who has read "Common Stocks and Uncommon Profits" by Philip Fisher may remember his discussion regarding tech investing. To paraphrase--very few winners and lots of losers and the average investor is ill-equiped to succeed in this environment.

Granted the Gorilla Game attempts to address this risk and Mr. Fisher was referring to the embryonic period of the '70s high tech revolution. On the other hand, Paul Johnson is a little flip with the Comment, "We also say don't get too worried about valuations because a Gorilla will always outdo your expectations for how valuable it can become." While this may be true, it has a little too much 20/20 hindsight in it. It's going to take a few years and a ton of growth for a company like Juniper with a $45B market Cap and 1000 p/e to catch up with its valuation. I hope it's destined to be a silver back of the likes of CSCO. I suspect it's a little too early to call.

Valuations these days are much different than the early and mid 90's when gorillas could be purchased at reasonable PEG ratios.

It seems that valuations should be given more emphasis. Perhaps we are entering a period in which we have historic opportunities for wealth--the Next Generation Network. But my sense is that current valuations also present historic opportunities for losses.

Though I'm a huge fan of the GG, I think valuations deserve more consideration--perhaps a separate chapter in revision no. 2.

Andy
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