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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (31638)9/14/2000 5:15:03 PM
From: Eric Jacobson  Read Replies (2) of 54805
 
Yes, I see what you're getting at. But in doing so you seem to be missing my point.

If your point is that it is unlikely for a potential gorilla to be unprofitable when it is in a tornado, and that the number of "by-the-book" investable potential gorillas that are unprofitable is small (and perhaps zero) then I'll agree with this generalization. However, the point I was trying to make is the investment decision should be made on the company's GG criteria, not its profitability status. This is a straightforward concept - a company's profitability status should not be used as a surrogate to measure its G&K status.

I don't own ELON so I am not familiar with its intricacies, but as far as I know ELON is not in a tornado and, therefore, does not meet the criterion of being a "by-the-book" investable gorilla candidate. I just quickly glanced through the W&W list to get a feeling for which companies that are regularly discussed here either were or were not profitable since this was the main topic of debate (remember, Malcolm admonished Shamsaee to RTFM and indicated profitability as a GG criterion).

I used ELON as an example to emphasize a point (and I even acknowledged in the post that I wasn't addressing your question squarely). Here is a company that is in a GG and is regularly discussed here as a company with the potential to be a gorilla. It is losing money. My point is that its current profitability status is irrelevant to gorilla gaming. Even if it enters a tornado and is still losing money (for whatever reason), a GGer should not shun the company based on its profitability status.

It's fine if Uncle Frank wants to use profitability as a gatekeeper when establishing the G&K Index. But we shouldn't confuse a gatekeeper agreed upon on this thread intended to reduce risk with what is actually discussed in the manual. Plus, as I said in my earlier post, using profitability as a gatekeeper is more complicated than it sounds since there's lots of ways of measuring whether a company either is or is not profitable (is JDSU profitable or not?). It's based on GAAP, not the GG. Understanding financial statements and business plans is more complicated than just looking at the bottom line, even if you do exclude one-time charges.
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