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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (8401)	10/17/1999 4:38:00 PM
From: Bruce Brown	Respond to of 54805

Still haven't heard anything from the JDSU fans about fair valuation.....would enjoy being lectured on this. I guess one could say that based on forward year's conservative earnings estimates, JDSU is currently richly valued. However, keeping in mind that the growth rate in JDSU's core business is nothing short of astounding, perhaps the conservative estimates will easily be surpassed. You'll get no lecture from me on JDSU, just confirmation that it is a stock to own for the next 5 years. I picked it up last year (Uniphase) and thought it was richly valued then. I just got off the train after a lovely 5 hour ride through the Alps - beautiful this time of year. Anyway, I read Inside the Tornado this weekend after Amazon delivered it to my door on Thursday. I have to say, Moore really hits his stride in this book. I consider it required reading along with the revised edition of The Gorilla Game. I was fascinated with the book and could not put it down. If offers additional insight into the technology sector that one doesn't find in the manual. BB

To: Apollo who wrote (8401)	10/17/1999 6:30:00 PM
From: StockHawk	Respond to of 54805

Sunday musings >> looking forward to Tekkie's comparative analysis on his timing/investment strategy from last Monday, looking at StockHawk's method.<< I'm sure tekboy will tell us about the result of his six stocks, but I thought I would add the result of my lone real time example, from post 7945 last Saturday: my silly little proposal - using GTC's at 10% below the price you are willing to buy... - example: lets say I own 500 shares of QCOM right now and I really want 600 shares because I am convinced that it will rise further. In fact I am ready to buy another 100 shares at the open on Monday. Lets say QCOM opens at 214. I could place a market order or a limit order at 214 or a GTC limit at 195 5/8. The only definitive thing we can learn from this experiment is that I need to improve my math - or my typing - since taking 10% off 214 is actually 192 5/8. So my GTC order at 192 5/8 would have been held in place until Thursday evening. If it did not get executed it would then be changed to a market order just before the close. In this case the GTC would have been executed shortly after the open on Thursday morning, when the stock dropped to 192. Recall that my original system, from post 7939 was: The system: Instead of placing a buy order, place a good until canceled order at a price 10% below the buy price. Keep the order in place for three days after the buy date, if near the end of the third day the order has not gone through, cancel it and buy the stock at the market price. Tekboy, in his experiment, tightened up the system (probably for the better) using a GTC at 5% below the price and doing the buy in (if necessary) sooner - I had suggested the third day AFTER the order was placed, he said the third day INCLUDING the day of the order. StockHawk

To: Apollo who wrote (8401)	10/18/1999 1:59:00 AM
From: tekboy	Respond to of 54805

A & B A (for Apollo): you should by now have already seen the results of my timing test, posted above. Yes, JDSU held up well. But so did SEBL and GMST. My little baby pebble ITXC even went UP on Friday, as everything else was plummeting. I know no one cares <sigh>, but since its quiet period will end on 10/25 I expect this week to be a blockbuster, and am buying some more at ~34. I hope (expect?) it to be north of 50 by the end of the month, and will take plaudits or catcalls then depending on the results... <g> B (for Bruce): BB and I have been engaging in some primatish missionary efforts among the Foolish heathen, some of whom have begun to recite the catechism quite impressively. In that context he posted a fine message over on the Fool's JDSU thread that sets out the rationale for what I think of as the opposite end of the G&K thread's investing spectrum (opposite from the pure and simple brilliance of Dancelot's 100% Q, that is<VBG>). tekboy@lastweekbad,thisweekgood?.com ________________________________________________________ Ron, You are asking the right questions. I see you have Mike Buckley on your favorite Fools list. The man is a wizzard. Especially at the gorilla game as I'm sure you know. My question is what do you do with a royalty game where the King has constructed an immense barrier to entry, like JDSU. JDSU does not have an enabling software, but it does have a huge market share (okay, that only makes it a King); lots of patents and IP (that sounds more Gorilla-like); and a large number of the small pool of qualified optical engineers already working for it. (I think I read somewhere that something like 80% of the available qualified optical engineers are already working for JDSU, but this may be an exaggeration.) Even though there's no proprietary architecture, there are immense barriers to entry for another competitor. I think the same could be said for BRCM, and probably lots of other Kings. Yes, it could be said for others as well. What do you do with it (them)? You invest in it (them) of course. You watch the sales growth, gross margins, cash to debt ratio, make sure inventory is not outpacing previous year's sales and make sure the receivables are not growing faster than the previous year's sales. (Spoken like a true Fool who has learned from the Gardners!) Although royalty games are a different game than a gorilla game, it doesn't mean they are not worthy of investing in and being rewarded with market beating returns. One just has to know that the risk level is higher than the more conservative gorilla game risk level. DELL, JDSU, BRCM, BRCD, EMC and others play the royalty game. The stronger the barriers to entry and the better these companies execute - the larger the GAP and CAP the market affords them. That's what we are seeing in all of these companies. I don't think we need an intermediate category between Gorilla and King just because of high barriers to entry. They are two separate games. The authors of the book came up with the new category of Gorilla-King which, for lack of a better word they named Godzilla. However, this term seems to be directed at more first to market, brand awareness, stickiness issues that fit into the Internet business models. AOL, eBay, Amazon, Yahoo!, etc... . The gorilla game crowd watching segment has pretty much defined JDSU as a King using current terminology. I think that is where it belongs, regardless of immense barriers to entry. That doesn't make it unattractive as an investment by any means. One just needs to be aware of the game and the risks involved. By the way, I believe one needs more than a single gorilla as an investment. You don't even have to be in 'at the very beginning' to accumulate market beating returns over time. Tekboy's list of the new possible gorillas: Qualcomm Gemstar Citrix Rambus Siebel added to the confirmed gorillas in there markets (although always transforming): Microsoft Intel Cisco Oracle i2 spiced up with some keen royalty game investments like: JDS Uniphase Dell EMC NTAP Broadcom Brocade would most likely give one market beating performance. Those are a lot of stocks. If you combine that with investing a portion of your money outside of technology in some great growth stocks with excellent financials - I think the game isn't as difficult as all the noise of the market forces make it sound. Sure, one has to do their research, map out an investment plan and pick the right basket of stocks. However, it can be done. The performance over time will astound and create wealth. Is the technology boom over? Are these great companies going to stop executing if interest rates go up? Let's talk in five years and compare notes. On another note unrelated to the above, today will probably be a classic shopping day in the merry month of October. There are very few sellers left of the wise money and once the unwise unload we can get on with the dance. BB