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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Jurgis Bekepuris who wrote (54542)11/1/2003 11:41:18 AM
From: hueyone   of 54805
 
I'll let you know my thoughts as situation progresses, though it may be that my "valuationist" hat will win and I will sell it regardless of its G&K status.

Yes, exit strategy is a sticky problem that even Buffet struggles with from time to time. Someone said that Buffett recently mentioned that maybe he should have sold Coke when its valuation got way out of whack on the upside. Of course Buffett is a victim of his own success now, finding it increasingly hard to find meaningful opportunities to find good homes for the huge amount of capital he has to invest. Where would he have reinvested all that money had he sold Coke?

Of course Buffet has generally already hugely reduced risk by paying close attention to entry points and seeking to buy companies with a margin of safety to their intrinsic value. He actively tries to determine what real wealth a company is generating for owners from internal operations, (and of course he certainly would not be so silly as to overlook shareholders financing employee compensation with stock options in his calculation of internally generated wealth as some have done here) and seeks to pay a price that is reasonable were he to receive those expected owner earnings over time rather than commensurate with what he thinks some other fool in the stock market may be willing to pay in the future. This is in stark contrast to the buy a Gorilla at any price for the long term that was advocated on this thread, and which ended in a disaster for anyone that fell prey to it. By paying such close attention to entry points that reduce risk, the exit points becomes a little less important.

So I think it is very important that you are making the clear distinction that although you may continue to hold Armhy at $5.79 per share, it sounds like you would not personally be tempted to purchase ARMHY with $5.79 as your entry price. In my opinion, holding is far from the same thing as advocating a buy.

I am not very good at holding companies who seem to be overpriced.

That sounds like a good problem to have in the long run. I often get busy with my real job and don't pay as close enough attention to exit strategy as I should.

JMO, Huey
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