Folks,
If I could implore Geoff Moore and all of us to focus on one thing, it would be the set of Rules #1 - #10.
Moore writes: I do not think the sector bottoms until the P/S and P/E ratios of tech stocks begin to parallel those of stocks outside the tech sector. At this point, the sector would be deeply undervalued, but until we get to this point, I do not think it will be allowed to rebound. Needlessly to say, after we pass this point, gorilla game buying is a huge win. But until then, cash is likely to be the most profitable equity on the block.
I'm sorry, but I think Mr. Moore is sending a seriously wrong message, wrong because it is contrary to some of the most important tenets in his book. That looks more like a combination of market timing and value investing than the long-term growth investing that the book is literally all about. More important, there's not one iota of thought in that comment reflected in Rules #1 - #10.
I would be a lot more forgiving of his continual contradictions regarding terminology and practice if he had gone on (and hopefully he did in a different post) to write that though cash might very well prove to be the most profitable short-term investment, it's impossible to know when that will no longer be the case. How will we know when the multiples in all sectors are similar enough that the market perceives tech stocks as being so inordinantly undervalued that it sends the stocks of Gorilla Gaming to significantly higher multiples than those of the non-tech sectors? We won't know . Moore won't know. The institutional investorss won't know. And the venture capitalists won't know. IF THEY COULD KNOW, THEY WOULDN'T HAVE MADE THE SILLY INVESTMENTS THEY MADE IN THE DOT-COMS.
It's comments such as those on his list-serv that make me seriously question the discipline he uses when stating that gorillas are always undervalued, that the market had switched to using a price-to-vision ratio in determining value, that cash will be a superior investment and that until such and such a benchmark is achieved, tech stocks won't rebound. I'd love to shake hands with the man and personally thank him for providing the framework of safety and growth upon which my entire financial future is built, but I wish he'd stick to the topics of product adoption and company- or industry-specific fundamentals. When it comes to the timing of an equity investment, he should be consistent with his book and refrain from discussing the stuff about investing other than what's covered in Rules #1 - #10.
--Mike Buckley |
