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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (36197)12/8/2000 1:32:48 PM
From: John Stichnoth  Read Replies (1) of 54805
 
Mike, I knew from the beginning that we agree. It's helpful to me to restate some of these ideas, given my tendency to drift off the center line in my stock investigations. I've read enough of your comments on it to be confident of that. Just to amplify one of your points:

when I mention that I justify a PEG of 1.5 as a fair-value threshold for a strong Gorilla.

As you note, this is a "point of departure". Further, I would say that the justification for the 1.5 depends on the strength of gorillaness, where the company is along its growth curve (I wouldn't be interested in IBM--the gorilla of mainframes--at 1.5 PEG. I'd love it for QCOM or CSCO), how you are defining PEG (last year's earnings? next year's earnings?), and things like that.

btw, re. the discussion earlier on how to measure PEG: I usually measure it in as many ways as I can. Last year, next year, five years. (And then, totally unscientifically, I choose one or make up one that I accept). It's such an easy calculation that it 's easy to do more than one. The value is in getting a feel for the confidence I can place in the ratio. Again, I feel much more confident of CSCO's PEG calculations than some other companies because of the stability of their earnings.
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