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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Pirah Naman who wrote (47935)10/15/2001 7:56:41 PM
From: Thomas Mercer-Hursh   of 54805
 
If it is for testing, I would think that rather than using a set of rules, you would want to test a range of values. If you are going to compare anyway...

This is what I meant. By "rule" I meant something like using FCF as the basis for the value and a particular way of relating it to share price. By "breakpoint" or "values" I meant values or multiples that would trigger a buy or sell decision. And yes, were I going to do such a thing myself, I would be looking at the variations and testing multiple alternatives.

Just as does somebody who does not perform a valuation exercise.

Although they don't necessarily do so in a numerical form. I think there are a lot of investors who think in more of a binary fashion, i.e., buy or sell, good or bad, without having necessarily formed any particular concrete idea about the annual return, rate of growth, or whatever.

What else can I say?

I don't know. Within the realm of companies discussed here, I think the effects are far from random.

If you merely checked to see if there was an advantage to some method over paying no attention to valuation, that would be very fast. If you wanted to test various methods or thresholds, that could be time consuming.

I don't see the two as being different. That or I don't consider the first alternative a real category. Without some system it isn't necessarily any more concrete than the impression one can gain from an entirely non-numerical approach.
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