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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Seeker of Truth who wrote (30567)8/27/2000 8:40:07 PM
From: sditto  Read Replies (2) of 54805
 
<<What do you think?>>

The problem I have with PEG or any other metric used alone as a proxy for competitive advantage is that the underlying numbers can be manipulated. Only when looked at in aggregate and trending over time do I get comfortable. I also tend to look at both the competitive advantage created by the business model (which the Gorilla Game drives home in spades) and then look at the underlying fundamentals of how the business operates. Typically, I'm looking for revenues > $1B, revenue and earnings growth > 30%, operating margin > 60%, net margin > 15%, no debt, and strong cash flow. Companies approaching these metrics are a rare breed indeed and only Gorillas and Kings tend to qualify.

I've also found comparing companies is largely irrelevant without considering the size and dynamics of their industries. Companies with the kind of financial performance I'm looking for come from only a handful of industries. You might be interested in an analysis I did earlier this year on just this topic at boards.fool.com

I'd pay big premiums for the industries having proven and profitable business models and strong fundamental growth drivers before I'd sink a dime in an industry with a low PEG.
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