A great response. Thank you.
I think we can get readily to the heart of it.
First, for the thread, I am operating on the principle that it's best to leave out everything that is not particularly relevant to GGaming. If stuff sounds "general", well it's not to be construed as only applying to general stocks and not to Gorillas.
With that being said, I also suspect we are in agreement on most everything. Which is to say that IF one purchases a Gorilla in the bowling alley and holds through until the Tornado has done its thing, and then MAYBE holds on longer, or not, and sells, then GENERALLY this (a) will yield phenomenal profits, and (b) span a time interval that is measured in years and which encompasses many ups and downs but mostly ups of stock price in between.
At least I agree with this and I think this is what you are saying. This is the premise of TFM, after all, so we should not disagree.
Furthermore I think I can go on to assume we agree even more in that it is silly to fret about buying at $5 vs $10 when one thinks long term value will be $100. In which case, I think both of us would say: "Buy. Get it over with and stop fretting."
Where things become interesting are the exception cases. For example, where one thinks it's worth $100 long term (ten+ years) and the current price is $120. Or even $60.
Which I think is our point of divergence, which has two roots.
Firstly, I believe that there are reliable methods of projecting long-term price targets for a company's stock. Which methods are applicable to Gorillas perhaps moreso to non-gorillas because one doesn't have to worry about the degree to which the number of competitors muddy the waters. With this in mind, I can say to myself with some confidence "this stock should be worth between xx and yy in nn years". Which together with the current price of a share is a necessary and sufficient condition to assert that a stock is over-priced or under priced. IMHO.
Second, I believe that it is not only possible, but likely, that a Gorilla's price can go through a period where its share price is well in excess of long term price targets (compared in present value dollars). Independent of the stage of the business (e.g. early, middle, late Tornado, Main Street...). A broad market bubble is but one of several factors that can lead to such an outcome.
If we agree on these two points, then the conclusion that it is both possible (first point) and sometimes advisable (second point) to either avoid buying shares of a Gorilla, or to sell shares that one owns because of rational expectation of profit.
If however we disagree on these two points, we are likely to fence with semantics around the derivative conclusions to no purpose whatsoever.
Where do we stand?
John. |
