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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: hueyone who wrote (39234)2/14/2001 10:21:47 AM
From: Mike Buckley  Read Replies (2) of 54805
 
hueyone,

can we permanently dismiss the untenable notion that anytime is a good time to buy a gorilla?

Thank you! We need more people speaking to that issue.

Personally, I don't believe that gorillas have "tended to be undervalued" the entire year I have been reading this thread.

Agreed. But I do believe they probably have been less over valued than the vast majority of companies with far less of a sustainable, competitive advantage.

For the people who believe that Gorillas are undervalued today, I surely hope they realize that their stocks will get trounced even more if indeed we do have a recession this year or next year. (I'm defining a recession as a minimum of two consecutive quarters of negative economic growth.) As Frank or Bruce pointed out awhile back, if we do have a recession, it's likely that the stocks will be at their lows approximately when the recession begins and will move upward long before the recession ends.

In hindsight, do you know anyone who has underestimated the long term earnings potential of their gorilla in the last year?

I think that's impossible to answer today because the truth won't be revealed until far into the future. I could ask if I know anyone who has overestimated the potential and it would be equally unanswerable today for the same reason.

You mentioned that you're upset for having overpaid for NTAP. Not to twist the knife in the wound, but it might be helpful if you would share with us the valuation process (if any) you used to determine whether or not NTAP was or is fairly valued.

As my personal example, I clearly overpaid for SanDisk when I bought it in July at almost three times the current price. I determined at the time that though the stock's relative valuation was a lot lower than at previous times when the fundamentals were weaker, the stock was still valued higher than I preferred. Countering that was the notion that it wasn't unreasonably valued considering the potentail for gorillahood of an enabling technology and the potential for multiple tornados one of which was already in progress. If all of that comes to fruition, I believed (and still do) that my entry price would eventually result in a handsome, long-term gain years down the road. Because I waited until the first tornado formed, I still feel that I minimized my long-term risk. Only time will tell.

--Mike Buckley
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