There was a book written a few months ago entitled "Gorrilla Investing
Chuzzlewit,
Based on your discussion, I think you mean to refer to The Gorilla Game by Geoffrey Moore. I am basing some of my holdings on his strategy currently. The primary weakness with the Gorilla Game, however, is its total disregard for valuation - the assumption that gorillas are perpetually undervalued . I don't want to argue the point, because I realize that stocks like MSFT, CSCO, and INTC have proven to be great examples of stocks that were perpetually undervalued, but identifying the gorillas early in the game - as the book says we can do - is more difficult as evidenced by the poor performance of the test Gorilla Game portfolio. I think to be successful with the gorilla game the reader has to develop his own set of valuation tools for these kinds of companies.
To tie this into Buffett, I think the Gorilla Game goes after companies with the same characteristics Buffett wants. These companies, because of control/ownership of proprietary standards are able to erect high barriers to entry and produce high ROE. This coupled with high growth rates and network externalities (industries tend to center around and support standards) can produce mind-numbing returns. The book outlines what to look for in a gorilla very well. The assumptions the book asks us to make are 1) that companies with these gorilla characteristics will become predictable investments going forward, and 2) that gorillas tend to be perpetually undervalued.
Point #1 I am willing to risk, becuase in a gorilla game the returns to the victor are huge. But point #2 is troublesome to me. I wish Moore addressed valuation. It seems he only dismisses valuation with a statement like "the potential value of a gorilla is so large that it will always be undervalued. The market always underestimates gorilla value."
BTW, while NETA was included as a gorilla candidate, I think the author specifically excluded AOL from his gorilla candidate list.
Shane |
