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

To: Mike Buckley who wrote (21125)	3/23/2000 11:30:00 AM
From: Boplicity	Respond to of 54805

Well said Mike. <eom> G

To: Mike Buckley who wrote (21125)	3/23/2000 2:18:00 PM
From: hueyone	Respond to of 54805

Mike, I find your margin warnings very appropriate in this market where it is very easy to be seduced in to easy money and irrational exuberance. Every once in a while I suffer from "shiny pebble and snowball creep"--a condition where in spite of my intention to have 90% or more of my portfolio in lower risk Gorilla and Kings as well as some reasonably priced stocks by traditional valuation methods, I suddenly find myself wanting to buy too many shiny pebbles and snowballs. In times like these, I like to step back and reread this spring 1999 quote from Warren E. Buffet, which ususally effectively reigns in my exuberance..... "In the whole United States -- which is, by far, the most prosperous country in the world -- there are probably around 400 companies that are earning $200 million a year after taxes, and you could probably name 350 of them. "Five years from now, instead of 400 being on that list, there'll probably be 450 on the list -- maybe 475. And a lot of those will be companies that are earning between $150 and $200 million today. So there'll probably be 20 -- or some number like 20 -- that come from nowhere. "If you look at the number of companies selling today at a price which implies $200 million or more of earnings right now, you'll find dozens and dozens of such companies in the high-tech arena. A very large percentage of those companies aren't going to fulfill people's expectations. And I can't tell you which ones, but I know there won't be dozens and dozens and dozens of these companies making a couple of hundred million dollars a year. And I know they're selling at prices that require them to be making that much money or more. But it just doesn't happen that often. "It's not that easy to make lots of money in a business in a capitalistic society. There are people that are looking at what you're doing every day and trying to figure out a way to do it better, underprice you, bring out a better product or whatever it may be. "And a few companies make it. But here in the U.S., after all of these decades and decades and decades of wonderful economic development, we still only have about 400 companies that have hit the level that would be required of a company with a market cap of $3 billion. And yet some companies are getting $3 billion of market cap virtually the day they come out. You want to think about the math of all this." I suspect WB is underestimating the number of companies that will "come from nowhere" to be big hitters and earners by the year 2004; nevertheless his point serves to give me pause when I start believing too many shiny pebble and snowball stories. Best Regards, Huey