I applaud you, Down South and Mike Buckley for being farsighted and bright enough to get in to many Gorilla stocks or candidates before the bubble hit in full force. And I certainly admire all of your considerable skills in identifying companies with sustainable, competitive advantages. But much of the appreciation in the GKI stocks over the last few years was concurrent with an expansion in multiples(P:S and PEs) relative to growth rates that I have never seen before in my lifetime. This expansion in multiples could not be expected to continue indefinitely and neither could economic growth without a slowdown or without a recession. As with most things in life, there is eventually a regression back toward the mean. I suggest we revisit your table in three years and see how newbie Gorilla Gamers who "overpaid" (IMHO) for Gorillas in year 2000 are doing.
I am not trying to diss Gorilla gaming at all. I want to hold some Gorillas in my portfolio. Finding companies with a sustainable competitive advantages is certainly a large part of the investment battle and I believe the chances of the stock prices of any of these high quality companies going to zero is slim to none. But another part of the battle is being patient enough to wait for entry points that provide some margin of safety---especially if you intend to be a legitimate long term, buy and hold investor as opposed to a momentum player. I suspect initiating a long term buy and hold strategy on Gorillas at the peak of valuations last year will have very serious, long term, negative consequences extending many years for those that did so.
I hope this does not come across like self righteous preaching. I am one who is suffering from making the very mistake I am preaching against. Although I knew better, I simply got inexplicably greedy and lost patience a couple of times last year. Then I compounded my mistake by continuing to view myself as a qaulity, long term investor when instead, on those instances where I had lost patience, I really had transformed myself in to a speculative, momentum buyer. I rode NTAP up well beyond where I bought it, but since I thought I was a long, term buy and hold guy, I also rode it all the way back down to a point well below where I bought it. Long term buy and hold and speculative, momentum buying don't mix--- whether it be with gorilla stocks or any other kind of stock. (IMHO)
The strategy I would like to follow is that of buying high quality companies (that you are doing a wonderful job identifying ) at reasonable entry points and holding for the long term. If in my opinion there are no reasonable entry points relative to my best guess for realistic, growth rates, I simply shouldn't buy.
Best, Huey |
