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

To: Mike Buckley who wrote (16796)	1/30/2000 10:42:00 AM
From: Apollo	Read Replies (1) \| Respond to of 54805

Thread signal/noise; participation vs. lurking... Great posts on "valuation" to wake up to, from BB and Merlin.... This is a great thread. The more our lurkers and newbies get involved by enmeshing themselves in Project Hunt, or in bringing relevant news on Gorillas/candidates to the thread's attention, or in discussing AND substantiating investment strategies (ie, "averaging down"), the smarter they and we will all be. The same is true in research, or in developing protocols for improving "processes". In my case, this is "processes of care" for critically ill patients. I believe the phenomenon of studying some issue or problem in which just the mere study of the issue results in improved outcomes, is referred to as "The Hawthorne Effect". This says simply that by the act of studying a problem, the endpoints or outcomes get better, by virtue of working on that problem over and over and over in an iterative process. The solution or tool or answer to the problem doesn't even have to be the best one possible. This is seen in the movement to "continuous quality improvement", a quality improvement practice that has migrated from industry into American Medicine over the past 15 years. We have applied this practice, to increase quality and reduce costs, and my experience would indicate that continuous quality improvement works. Here on G & K, we have been practicing continuous quality improvement. Bruce talks about valuations, Merlin questions it, Bruce refines it, Merlin refines it further. Bruce was compelled to go review both the MF, and TFM, and he is smarter for it. The rest of us, and especially Bruce and Merlin, are more knowledgeable. When Dwaynu questioned my comments on EXDS a week ago, I was forced to go reread passages in TFM; and re-explain the right and wrong; I learned still more about the GG, and now better understand EXDS, in the process. We've been doing this for almost a year, and the more involved, the smarter is the thread participant. I've both lurked, and participated. I think lurking will increase your knowledge, but participating will do so much faster. Each of us should do our part to increase the signal/noise ratio, as exemplified this past 1/2 day by BB and Merlin in their discussion. Asking lots and lots of questions, especially before RTFM, increases the noise. Asking questions in the context of the GG, after RTFM, increases the signal. Of course we have to have humor and fun too, but with the increasing number of participants and posts, some of the fluff, or personal objections or explanations, can be PM'd. This goes for me too; I'm as guilty as the next poster. <g> There are many examples of posters here who post high substance, with references. Just to pick two for example, look at the posts written by StockHawk (pure substance, references to TFM), and Lucius Lamar (substance, and perspective brought from decades of investing experience). Off to Hawaii for a few lectures and some vacation. Best to the thread, stan

To: Mike Buckley who wrote (16796)	1/30/2000 2:06:00 PM
From: Jimmyjohn	Read Replies (1) \| Respond to of 54805

Using the PEGulator and earnings estimates from Market Guide at marketguide.com I calculated the following PEGs for several companies at Friday's closing prices. QCOM 1.7 CSCO 1.8 CREE 2.1 GMST 2.8 NTAP 3.8 JDSU 4.2 Given the limitations of earnings estimates, do you think such figures are useful in trying to select a company to buy on this current dip in prices?

To: Mike Buckley who wrote (16796)	1/30/2000 2:23:00 PM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

Mike, I didn't mind at all that you embellished the valuation discussion to a more vivid level. We need to get it out on the table and examine it. I have to assume that Geoff Moore - when he makes comments on the GG listserv - about historic PSR's in 'normal' markets that he gets most of his thoughts and information about this from Paul Johnson who is, of the authors, the one most closely tied to making a living based on valuations. However, I don't know where Geoff derived those thoughts, so I don't want to assume it was from Paul Johnson solely. Yes, it is important that we point out which metrics seem best suited to be used for keeping a check on gorilla valuations. It's interesting to note the PSR expansion and retraction of Dell Computer since the first manual was written and how the author's made note of that in the revised manual. Take that out a little more in time to what the PSR of Dell has retracted to over the past 12 months and we see what happens when a non gorilla stock, but one firmly in the value chain of the PC technology adoption life cycle, should and should not hover around. If we look at the point of the technology adoption life cycle that Qualcomm is currently located (in comparison to the PC technology adoption life cycle of other gorillas), I do find it interesting that Qualcomm's PSR has dropped from the range of Cisco and Microsoft in the high 20's in late December/early Janauary down to 17.xx this past month. If Moore's comment (regardless if it comes from himself, Johnson or another source) that in a 'normal' market over the past few years Cisco and Microsoft had PSR's around 16 and up to 18-20 on the high end that we find Qualcomm sitting firmly in that territory now. Yet, as we have discussed, Qualcomm is much earlier in their technology adoption life cycle than Cisco or Microsoft are at this point. If you listened to the Radio Wall Street interview with Richard Sulpizio (President/COO at Qualcomm): radiowallstreet.com it is nice to hear Suplizio's bullish comments and talk of where the company is, where it is going and discussion about the SnapTrack acquisition. Some nice talk about first mover advantage, distinct lead on technology and the future growth possibilities. If we factor in the 2 to 2.5% royalty/licensing fee of each phone, plus the income per device for the GPS and think about what the more featured hand held devices selling at higher prices might be going forward - it's a rosy outlook. If you haven't had a chance to visit the SnapTrack FAQ, here's the link: snaptrack.com "The incremental materials cost to add SnapTrack functionality to a digital wireless handset in high volume is expected to range from $5-10 initially. The price is expected to drop sharply with mass volume production, higher degrees of integration, and predictable advances in chip manufacturing technology." It's worth rolling up your sleeves to get a handle on what $1 Billion in stock was able to buy Qualcomm. I like the FCC mandate of October 1, 2001 for implementing the 911 call: "The FCC mandate says wireless carriers must provide the location of 9-1-1 calls to appropriate public safety answer points with an accuracy of 125 meters 67 percent of the time. The deadline for implementing this is October 1, 2001." Although there may very well, in the end, be a phase in process for this technology - it will happen and Qualcomm is in an excellent position now. Read the FAQ at SnapTrack to see why their technology is so much better (even though it was presented so well on this thread earlier in the week). So, back to valuations and the current PSR of Qualcomm which stands at 17.xx (Cisco stands at 26.44, Microsoft stands at 22.68). Suplizio, when asked in the interview, to place Qualcomm's CDMA in an inning of a 9 inning ball game chose 'the second inning'. As Mike pointed out, the authors suggest the importance of knowing where in the technology adoption life cycle we are for the enabling technology company. Of course there is going to be a premium paid for owning a stock in this extreme growth portion of the cycle. I am of the belief that a few years down the road from today, we might have proven the theory that the market misjudged the CAP and GAP of Qualcomm in the first quarter of 2000. Don't take this as any kind of investment advice, but I certainly like the PSR at 17 better than I did at 28. If it took a 'scare' of seasonality in the wireless business to knock it down coupled with FED fears - then so be it. I'm investing for the long haul and have to examine valuations when investing new money for those long haul time frames. My children's holiday money is waiting and I will be making a decision soon. I'm not going to sweat it out and be down on myself if I miss the 'bottom' or lower range by 10 - 15 % when adding new shares of Qualcomm to their existing shares, but will allow time to make up the difference going forward. I'm probably pretty boring to listen to with my LTB&H strategies because I've never been drawn to the 'action' of the market. However, I think there is plenty of compelling evidence as gorilla game investors what the long term can mean for investing in emerging gorillas in various technology adoption life cycles. BB