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

To: Thomas Mercer-Hursh who wrote (15142)	1/14/2000 12:32:00 PM
From: DownSouth	Respond to of 54805

Thomas, your example of WordStar serves as a point of discussing "what game it is that one really wants to play". WordStar was application software. Here is what TRFM says about application software: Rule 1. If the category is application software, buy in the bowing alley. "Software applications are good buys in the bowling alley because even those companies that will not become gorillas still produce good returns. Markets for business application software never completely consolidate, the way they do with enabling technologies, so chimps have more winning options. Once a customer purchases a particular vendor's application, it is very hard for another vendor--even a gorilla--to overcome the switching-cost barrier and take that customer away. Application markets still generate gorillas, to be sure, and those gorillas still have all their customary advantages when it comes to garnering new customers. But they cannot be quite so predatory at the expense of their competition." WordStar was virtually the first full function text editor for PCs. It was impossible for for companies like Wang, Xerox, NBI to displace WordStar, even when the word processing market was in a torrid tornado. The reason was that WordStar was the only text editor that ran on an "open" platform (the PC) and the users of WordStar tended to be very computer capable folks who had invested quite a learning curve into WordStar's cryptic editing methods. As word processing moved to the PC and then the PC became THE word processing platform, as opposed to proprietary hardware platforms, WordStar's installed based still remained stable in terms of numbers of users, but as a percent of the market it shrank wildly. Wordstar then had to compete with MultiMate, WordPerfect and a few others (before Word came to be), but failed miserably, mostly, imo, because they could not give up their cryptic interface without losing their installed base. (Wordstar hired past president of Sperry Univac in its vein attempt to compete in the WP market.) TRFM goes on to say: Rule 2. If the category is enabling hardware or software buy at the start of the tornado. "Unlike the relatively civilized world of application software, where multiple winners can emerge within a single gorilla game, with enabling technologies, be they software or hardware, there is a mujch more violent consolidation creating much more of a winner-takes-all outcome." Now there is one important twist here. What Moore suggests is the "basketful" approach, where one buys a group of potential gorillas/kings at the times prescribed by Rules 1 and 2. What many of us do here, instead, is wait until the tornado has progressed to the point that the winning Gorilla or King is apparent to those who do their due diligence before buying. Thus we buy at the steepest slope in the curve, giving up the growth of the early tornado. What this does for us is allow us to allocate our resources to one stock in most rapidly appreciating tornadoes, rather than having to monitor the tornado in order to identify the stocks in our basketful that we need to sell in order to consolidate into the leaders and then the winner.

To: Thomas Mercer-Hursh who wrote (15142)	1/14/2000 1:08:00 PM
From: gdichaz	Read Replies (1) \| Respond to of 54805

Thomas: Waiting until a gorilla is "mature" misses the main gain from finding a gorilla. As LindyBill has put it so well, the best ride is the ride up the bell curve when it is rising rapidly. Sure, there is more comfort and less risk (probably) is holding a mature gorilla. But what is the opportunity cost? What could be in your portfolio in place of that mature gorilla? Again LindyBill shows the way in this. (At bit brave perhaps, but that's fair enough). He sold his other stocks - even his mature gorillas and kings - to concentrate on the rapid rise of the Q from last spring. That is doing exactly what he suggests, riding the steep slope of the bell curve up. I am envious because I have only been riding that curve with half my portfolio in the Q, he has done much better with all in the Q. Now his !00% in the newest gorilla on the block and my 50% is certainly not for everyone. You do need to sleep at night. (Actually I lose less sleep over the Q than some of my other holdings which are less certain to have a good solid ride up.) LindyBill will speak for himself as he does very well, and I hope I have been accurate in my example using his case as he has outlined it here. If not, I am sure he will correct me. But his example is the best "pure" case in point. Best. Cha2