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

To: Juliet who wrote (20295)	3/16/2000 1:14:00 AM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

The WSJ article gives part of reality but not all. The fact is that for many years IBM was a wonderful investment at 50 times earnings. It cranked out 20-25% annual increases in earnings like a clock. Polaroid was a great investment for more than a decade. About 1960, XEROX at 100 times earnings was one of the most fantastic investments that I was ever involved in. I recommended it strongly to my mother who made a bundle. It was great for about a decade. All of these three finally slowed their growth. By the time their growth slowed they had become a religion and many people clung to them too tightly. Today's growth rates are very high and worth big P/E ratios. How big, who knows. One thing is certain though, the declines will be horrific when there is company specific bad news. As long as the news is great, I think that in a zig zag way there will be good gains. Let's look for example at NTAP. It will probably quadruple its earnings over the next two years. Is that worth 350 times earnings? It depends on the period after these next two years. 40-60% for a few years could make the stock seem cheap now even at this normally outrageous price. If EMC or somebody else starts cutting into their market share in filers then people will jump ship fast. In other words we are dealing with high risk and high reward. Some companies will persist in their growth. Look at CISCO. The global internet has only begun. I think we have to own a diversified bunch of gorillas so if the game, or comparative advantage period, is ending for one of them we won't be hurt so catastrophically if we jump a little late. Finally please note that we have entered an era in which engineering/scientific talent is in short supply. The rapidly growing companies naturally attract more than their share of the talent. This tends to lengthen their fast growth period.

To: Juliet who wrote (20295)	3/16/2000 1:26:00 PM
From: Mike 2.0	Read Replies (1) \| Respond to of 54805

Malcom's reply to this article Message 13214825 is a good one. Basically, anyone who has RTFM will be able to dispute the points the author makes. For example, Polaroid is identified specifically in TFM as a closed technology that earned Polaroid truckloads of cash in its day. But using TFM logic you would never have bought the stock. You would have to have your head in the sand to not see new, open technologies (increasingly cheap but good point-and-click 35 mm cameras, camcorders and later digital cameras) quickly eat Polaroid's lunch. AFAIK most of their revenues are from Xray imaging not instant cameras, a technology in the final end of the technology cycle. The future for the stock was NOT bright when analyzing the stock based on TFM principles. I suspect some smart apples out there realized this and shorted Polaroid at the pinnacle! Similarly IBM was no buy to anyone making a GG analysis of the PC market. IBM PCs were off the scales in absurd price points compared to new vendors like Dell and Gateway. Nuff said. The author's message that a company has a tougher time generate long-term double-digit earnings growth when it makes big-cap status holds true only if arrogant, naive management is "managing" the business. Here too, TFM is clear that the Ciscos, Microsofts and Intels today are not the Polaroids and IBMs of an earlier era. BWDIK? After all, the author IS from Wharton you know ;-)