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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Uncle Frank who started this subject3/26/2001 3:57:33 PM
From: EnricoPalazzo   of 54805
 
good post from the email list:

Date: Mon, 26 Mar 2001 03:28:32 -0800 (PST)
From: Ali Bukhari <aab@yahoo.com>
Subject: Re: Value Investing Question

There is a reason why Buffet won't buy into the New New Thing. It's because it usually has no chance of becoming a sustainably profitable business which creates real sareholder value. Very few tech companies throw off free cash because they are hopelessly trapped in a game where to survive the company must pump all cash flow into cap-ex; not doing so would cause the company to fall behind the curve. In reality, most tech companies are bad investments; they can be quite profitable speculations, but that is not the same as an investment. This is where Gorilla advantages come into play. Gorillas have established themselves to the point where their competitive advantages allow them to create large free cash flow. We really don't know how long this is sustainable, though, and I feel Intel and Microsoft over the next couple of years will show us just how long a Gorilla can grow free cash flow before it needs to more heavily recycle its cash flow into its business in order to stay ahead of the competition. There is already some signs that Intel is hitting a brick wall and is now growing cap ex faster than revenues (the opposite of what a Gorilla in its prime, IMO, should be doing).
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