Given a choice between a stock CURRENTLY growing its sales and profits at 50% per year, and a stock which is now growing at 25% a year but in a couple of years looks highly likely to start growing at 100% a year for several years, an intellectual would favor the latter, because a calculation will show a superior return. But I suspect that the market place, more often than not will favor the first stock.
A stock that has unrealized potential is discounted with respect to the company that has actualized is growth. The "intellectual" (sorry, but I think that sounds pompous, how about "rational person"?) would not necessarily favor the latter. It has greater risk associated with it, and must be balanced against the potential. Further, my reading of the manual implies that Gorilla Gamers should favor the companies who have crossed the chasm already, and will continue the growth, or, in the case of buying baskets, several stocks with the faster growth and higher risk, quickly leaving those that fail.
But how much higher? We have no answer.
We can make a good guess at orders of magnitudes.
Naturally the long term is paramount, but we can't neglect the near term.
No, but the near term concerns with a held stock can usually boil down to the question: "Will this stock be a Gorilla (or King or basket stock depending on the game) in the near future?" If the answer is yes, then the price doesn't matter (much). If the answer is no, then why hold it?
Let's assume that eventually all companies become average companies.
That's a very poor assumption, especially since we're dealing with gorillas. There aren't enough of them to make statistics meaningful. A statistician would say that someone with one foot in fire and one in ice is on average comfortable, and baseball announcers frequently trot out meaningless numbers, like the batting average for a player on Tuesday night games with a waxing crescent moon against left handers on astroturf.
Tom CF
(All in my opinion, never humble, in my vice of arrogance, but always ready to yield to better reason.) |
