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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: tekboy who wrote (40192)3/10/2001 12:01:25 PM
From: Mike Buckley  Read Replies (1) of 54805
 
tekboy,

Great post. Thank you!

I'd like to expand on a point you made. You wrote that "it is difficult to translate the qualities that distinguish Gorillas from other companies into the sort of traditional, highly quantified valuation metrics that valuation junkies usually rely on. This has meant that even some of the most serious students of valuation around here--Merlin and Lyre, for example--have found it difficult to use their valuation skills to pick good entry and exit points consistently."

As much as I believe that valuation can be a tremendously helpful set of investing tools, I doubt that applying traditional valuation metrics to traditional companies' stocks will render consistently good entry and exit points. My point is that it doesn't matter whether we're talking about Gorillas or more traditional companies. If we could always be successful using those tools with traditional companies, I believe it would be relatively easy to tweak them to apply to Gorillas.

I still have no idea what Gemstar's fair value is and I believe I could shoot holes in just about any argument for any proposed fair value, high or low. As another example, I bought Qualcomm for three-year-old at about $130, not having the foggiest idea at the time what the fair value was because I didn't (and still don't) know what the company's market potential is. (I do concede though that because of my uncertainty about the valuation, I reserved some funds and used them to buy at a later date in the $70s or $80s.)

I do maintain though that using valuation tools can help us avoid many of the worst mistakes. Ironically, though, one of the reasons I believe in the value of long-term investing is because despite my best effort to value stocks, the best possible way to render long-term valuation relatively accurate is to hold the investment for a long time.

--Mike Buckley
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