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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: lurqer who wrote (40258)3/11/2001 8:31:04 PM
From: Thomas Mercer-Hursh  Read Replies (1) of 54805
 
You might consider pondering the effects of p/e compression.

I understand the principle well enough, but have you done any exploration on the specific impact on gorillas or gorilla-like companies during a secular bear?

One of the things I wondering, for example, is to take something like the historical pattern of Cisco and have this bridge from a secular bull to a secular bear. During a secular bull we have seen Cisco repeatedly 1/2 or 2/3 of its value as a part of its volatility. One imagines that P/E compression would produce a similar sort of drop. But, having had that drop occur, wouldn't one still expect to see much of the same growth from that point due to the fundamental growth of the company? I.e., a one-time change in the average multiplier would be similar in impact to one of the volatility drops?
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