The thesis sounds pretty suspicious to me. A simplistic plan and a compelling, adrenaline inducing slogan/book title (Gorilla this or that, Power Investing, bla bla bla) all underpinned by the questionable implication that the strategy would have resulted in timely investing in Microsoft and Cisco had it been employed. Great for selling books and infomercials, questionable for investing in stocks.
My off the cuff reaction:
1) Why not just put your money in mutual funds and watch all market segments until the Gorilla's emerge, then place the investment bets. It seems to me that this approach would eliminate the need to identify "market segments that are likely to dominated by a Gorilla". In doing so, you haven't needlessly tied up your money in a market segment that might not ultimately be dominated by a Gorilla. Why should I believe that the diluted investment in the market segment while waiting for the Gorilla to emerge will beat the returns of a well chosen mutual fund ?
2) I can almost buy this approach if you're talking about a couple of players battling for supremacy, but a diluted bet accross lots of companies does not seem wise. How often are you indifferent to an investment in 5 or so different players in a market segment ? If you don't trust yourself to make an investment choice among 5 individual stocks, then you're probably better off in mutual funds.
3) If you are smart enough to identify market segments "that are likely to dominated by a Gorilla", I would assume that you are smart enough to wait until the Gorilla emerges from the rest of the chimps and then place your investment bet.
4) It may seem compelling to look back at the history of Microsoft and Cisco (probably the two most dramatic success stories in the 90's) and contrive a strategy today that would have made lot's of money, but it is far from certain how this strategy might have been executed in a real world.
5) How does this strategy account for diversified companies ? Microsoft is operating system, network, desktop application, database,etc.; Oracle is database and apps; What do I do when GE is battling company xyz in MRI machines ?
The bottom line on Microsoft and Cisco is that each was a fabulously managed company that was skilled at identifying and exploiting market opportunity. If you can identify companies that are well managed, exist in an industry with good growth opportunities, have demonstrated an ability to execute a plan, have shown flexibility in the face of a competitive market, then your investments will do well.
No disrespect intended, but it sounds like alot of "bunk" to me. In fact, Paul, I am a little surprised that you are placing some credibility in this investing recipe. Up to this point your approach has seemed pretty level-headed.
Now I am beginning to wonder whether might be serious about having been converted to a market timer. Now, in addition to figuring out the optimal market timing, you have added another trick to your reportoire: identifying industries that are likely to be dominated by a Gorilla. Is there anything else going on in your life that we should know ? drinking binge ?, experimenting with crack ? body piercing ?
In fact, the next industry that you identify as likely to be dominated by a Gorilla, let me know. I will place my bet with the MLG (most likely Gorilla) and you dilute yours accross the group and we will track returns.
return to your investing roots,
Rick.
P.S. With respect to business process software, I have no clear idea whether it is likely to be dominated by a single Gorilla (probably not, though). However, I do have an opinion about which companies among Peoplesoft, SAP, Baan, and Oracle has the best growth potential over the next year. Do I need to tell you which ? |
