JBE, Chuzzlewit IS a brilliant stock picker, in my estimation. One of the better ones I've come across on SI. (I look for them. There are a number of others.)
Re: technology stock picking. The first rule is to not lose money. That is both simple and profound. As you think about it, it involves favoring established stable winners over emerging supposed supergrowers. Of course, the fabled riches come when you can find the long term stable winners, the Msft, Csco, Intc, Psft, Dell, etc. as they are emerging.
It is I think generally a mistake to try to buy too early and too cheap. The way to buy tech cheap is to buy the best at moments of general market panic, a short term individual issue stumble, or some generalized tech pessimism.
It is nearly always a mistake to pick the second and third tier in a sector because they are cheaper. Those are the ones that really crash.
The disk drives like the commodity chip makers are in the worst areas of tech and are cheap for a reason. The whole effort should be to find non-commodity long term quasi or real francise winners. That's what the book Gorilla Game is all about. Which I haven't read, only read about. Don't suspect there is much really new there, but it does seem to collect and codify in its own language what are smart, and not so smart, ways of approaching tech investing. E.g., the sorts of things I've been saying above.
The ideal of course is to find a tech company that is as reliable and steady a grower as Coke or P&G or a drug co., that has a comparable francise lock on its niche, and which is growing at a 25%+ rate over the longer term (e.g. five years.) Companies that pretty clearly fit that bill are e.g. Msft, Csco, Psft. Dell is more controversial. Its been growing faster lately, no one thinks it can continue. Everyone has thought it is in a commodity business. While that is true, its way of doing the business is not commodity. Think Walmart compared to other department stores. And on and on.
But of course the real ideal is to find such a company selling at a price which does not discount all its future growth.
It is the rare tech company, even among the established stallwarts, which does not reach a stock price peak at some point which takes a full year to again hit. So timing on tech stocks is not insignificant.
You pick a great company. And wait until everyone is really pessimistic. And then buy it. Those have been my great wins. With Dell, Intc (two.5 years ago, now out), Psft, and a host of others.
Also pick the long term winner tech sectors. Internet plumbing. (e.g Cisco.) Telecom equipment (how about not only Lu, but also Tlab, Afci, Noka, Qcom). Enterprise software (e.g. Psft) . Windows NT invasion of the enterprise/Unix space. (not only Msft, but also check Ctxs, Neta). Wintel invasion of the Server/Workstation performance spaces. (Not only Msft, Intc (later now slow grower?), but also Rmbs, Dell.)
And on and on.
Doug |
