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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Art Bechhoefer who wrote (45979)	8/29/2001 8:39:59 PM
From: Stock Farmer	Read Replies (1) of 54805

Hi Art, yes, you have seen behind my curtain. I am forced to choose between the theories of greater fool and efficient market. Not willing to count myself amongst fools by choice, I am biased towards the efficient market theory. Under rigorous analysis they both end up at the same place (like the argument between wave & particle). I just prefer the apparent sense of one over the other. This being said, I also recognize that fundamental pillar of the Gorilla Game which is being restated here: unproven IP is always improperly valued. Both Moore (Gorillas undervalued) and Christiansen (true disruptive technology underappreciated) have written much about it. This word "improperly" also allows for overvaluation. Which I suppose is why a high percentage of wonderful new ideas fail to survive the test of reality. So finally, while I say I believe in an efficient market, I was also a student of physics. There we wrestled with many paradoxes in the quantum world. Thus I have no difficulty holding the seemingly conflicting belief that the market is at all times instantaneously inefficient. I resolve this paradox merely by shifting time frames: that it's just as wrong to the downside as it is to the upside over a long enough period of time. So we both arrive at the same point, which is to say that the market is efficient, but not at all instants, and thus inappropriate valuations are always to be found. Which means stocks will be over or under valued and this (in the tech world) is largely due to over or under appreciation of the value of this ephemeral and intangible stuff we call "IP". Which leads us to the same difficulty from two different points. Your difficulty is how to estimate the value of unproven IP. I have the same difficulty, although mine is manifest by properly sizing the future cash flows that I expect the IP will generate. Thus I think we are wrestling with the same problem. Only our taxonomy and approaches differ. Rest assured we both look for cases where "the share price does NOT accurately reflect the intrinsic value of the company! John.

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