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

To: gdichaz who wrote (9281)	10/31/1999 10:47:00 AM
From: TShirtPrinter	Read Replies (2) \| Respond to of 54805

Uncle FranQ here's my twist on covered calls. I am selling some Nov's for insurance on the Q that is in margin. Already sold Nov 250's on the popup, and plan to sell some Nov 220's on Mon. I have come to the conclusion, after reading this thread, even the small amount of margin I have isn't going to be part of the longterm plan on the Q. This is incredibly hard for me to do since I have been successful being very aggressive with this stock for almost 2 years. Sharing your history with DellHeads has convinced me. Tony PS Update soon on Uncle franQ's workout shirt. Get ready. PPS Already have my tickets for San Diego. I can't wait to meet lots of you all.

To: gdichaz who wrote (9281)	10/31/1999 11:24:00 AM
From: Mike Buckley	Respond to of 54805

THIS MONTH IN THE FRONT OFFICE The News Because I was away for a significant part of the month, I'm going to dispense with my normal run-down of the news. I'm also going to switch from a weekly reporting of the news to a monthly reporting of it. I'm sure we'll cover really important news in our day-to-day ad hoc discussion of stuff. That way I'll be able to report not just on the most important news at the end of the month, but also on the thread's consensus about its relevance. As a result, I hope there will be fewer news items and more substance about the most important issues of the month. The big stuff announcing the intended acquisitions of Clarify and Vantive were handled in my absence. The other important news is Siebel's expansion of their partnership with IBM and Siebel's new partnership with Unysis, who has agreed to market, develop and integrate products for use with the NT platform. The Stocks The numbers speak for themselves. Year-to History History Date Month Annualized Gorilla Game 213.15% 184.97% 56.05% 122.15% S&P 500 22.73% 10.86% 6.25% 15.40% Russell 2000 -7.42% 1.58% 0.31% -5.25% The most important revelation for me is that the Front Office Gorilla Game is beating the S&P 500 by nearly ten- fold and it has been done in real time. Unlike the book in which a rear-view approach was used in case studies, this gorilla game was not started at what might have been the optimally best time. It was started when I became interested in it. Similarly, when I sold Vantive and Clarify due to the announced acquisitions, that wasn't done at the best time. Normally I sell a stock immediately upon the announced acquisition. Unfortunately, I was in Italy and didn't know about the purchases. By the time I got back, learned of the news and sold the stocks, Vantive was about 25% lower. These are human, real-time issues that show gorilla gaming is relevant, that it doesn't require the precise timing by people in the industry or otherwise in the know. As for the above numbers, they don't show that it took 15 months for the portfolio to double in value, adding $10,000 to the coffers. That was at the end of August. It took just two more months for it to increase another $10,000, to be more precise, another $11,315. Having sold Vantive and Clarify, we're now down to the dominant player in the internal help desk software, Remedy, and the dominant player in the total front office software market, Siebel. The numbers: Current 5/25/98 5/1/99 Change % of Buy Buy Average Current from Portfolio Price Price Cost Price 5/25/98 Remedy 30.9% $17.44 $17.50 $17.46 $43.00 146.56% Siebel 51.5% $23.00 $38.44 $27.10 $109.81 377.45% The final tally: Stocks $25,817.44 Cash $5,497.58 Total $31,315.02 Valuations This is the first time I've shown valuations as part of the Front Office Gorilla Game report. That's because traditional valuations don't have a hand in gorilla gaming, as we all know. Considering that enterprise-wide software seems to be the darling of Wall Street in the last month, the stocks have run up considerably on no news I can find that is comensurately important. Not that an understanding of a traditional valuation will affect the strategies of this Game, but it might help us appreciate how traditional valuations look while a gorilla game is in progress. Having said all that, I ran a PEG ratio for each, showing the PE relative to the estimated growth from now through Year 2000. Remedy PEG: 1.9 Siebel PEG: 3.6 Though it's not unusual for these relatively young software apps companies to sport a PEG ratio of about 2.0, I don't remember seeing any of them well above 3.0 as is the case of Siebel. There are a couple of explanations. The first comes from an understanding of the estimates. We don't yet have estimates for 2001. Also,the estimates for the year 2000 will be adjusted higher once Q4 numbers come in. Estimates for the current year are so out of whack that they are $.07 too low if the company only meets Q4 estimates. Estimates for Q4 predict a record quarter for Siebel and the company has been consistently beating estimates for about two years. The second explanation is that the Naz is at all-time highs, that tech stocks in general are looking great, and that enterprise software companies are looking even better. Investors are tossing traditional valuations to the wind. The third explanation, the explanation readers around here probably prefer, is that expansion of the PEG ratio is typical of gorillas and potential gorillas as their fortress on the top of the mountain becomes less and less impenetrable. Gorilla gaming is still new enough in a real-time view that this growth investor, who likes to apply at least a smidgeon of traditional valuation, is skeptical of Siebel's historically lofty PEG ratio. Is it Wall Street's way of crowning the primate or is it what Greenspan would say is irrational exuberance? You get to decide. Continuing the Game: Help me decide! Whereas the cash position has always been less than $100 in the past, it is now more than $5000 and is nearly 20% of the portfolio. That's because I didn't use the cash obtained from the sale of Vantive and Clarify to buy more stock. I will soon make a decision about how to deploy those funds. My four choices: 1) Continue playing out the game as originally started, which dictates buying more shares of Siebel and Remedy; 2) Use the cash to add a new sub- industry play consisting of companies making marketing software; 3) Add a new sub-industry play made up of companies specializing in selling front office software to mid-tier companies; or 4) If choice #2 or #3 is implemented, add $10,000 to the game with which to add the new sub-industry. The current cash position would be used to purchase more shares of Siebel and Remedy. I'd be very grateful for your input about which would be most educational as an on-going gorilla game to all of us. The Background and the Caveats The portfolio began on 5/25/98 with $10,000 in fictitious money. This is not a real-money portfolio. Commissions are based on $8 per trade. Because the interest earned on cash does not significantly affect the results of the game, it is not accounted for. I own shares in Siebel Systems. I have owned long and short positions in the above front office software stocks as well as others. I reserve the right to do so in the future. Don't make any decisions based on any of my comments. Do your own homework and make your own decisions. And good luck! --Mike Buckley