This Month in the Front Office:
THE FRONT OFFICE GORILLA GAME
Volatility: It goes with the territory.
Few examples of that will be better than the example of our
own Front Office Game. Noticing the discussion of
volatility in the folder lately, it's especially pertinent
to bring some data to light about the Front Office Game.
(Am I the only person who notices that volatility is only
an issue when it appears on the downside?! :)
Having begun less than two years ago, the Game rarely
showed a profit in the earliest days. Just the opposite, in
the first five months its value rather gradually declined
to the point that it lost 40% of its value. During that
time the S&P 500 declined about 5%. Those who remember the
Nazdaq decline of two years ago won't be surprised to learn
that that all-time low point in the Game occurred in
October, 1998.
Every bit as gradually, the value of the Game increased
through the last two months of the year so rapidly and
assuredly that it regained all of its previous losses by
mid December and showed a 10% gain at the end of the year.
Just one month later, in January, the Game sported a solid
40% again, almost exactly the same profit that it showed in
losses just three months earlier. To put it differently, in
a little more than three months the Game increased 135%.
In the middle of the following April, another
two-and-a-half months later, all of the profit was once
again almost completely decimated. To be accurate, the
value of the Game was exactly 3.64% greater than when it
had begun nearly 11 months earlier. Yet just six weeks
later in late May, on the first anniversary of the Game's
beginnings, the profit was once again back to its old high
of about 40%.
Five weeks later the profits had advanced from that 40%
high to a new high of 95%. In little more than 13 months,
the portfolio had nearly doubled. But not quite.
Continuing in its ever-present course of volatility, the
Game lost almost half of its value between early July,
1999, and early August of the same year. One month later
all those profits were again attained and the Game hit a
new high with about a 112% gain since inception.
Just as many people in the folder saw their personal
portfolios expand exponentially in the last quarter of
1999, the Game's profits also exploded from that 112% to a
325% gain in late December.
Unlike many people in the folder who are disappointed that
their personal portfolios haven't continued to rise this
year, and might even be more disappointed due to a
declining portfolio, the value of the Front Office Game
went ever upward to a 490% profit at the end of February.
Though the Game is 40% higher now than at the beginning of
the year, it continues to exhibit its totally volatile
ways. In February it increased in value 45% and gave up
half of those profits in March. To put that in perspective,
the Game was begun with $10,000 nearly two years ago. Last
month it decreased in value close to $9,000.
The lesson to be learned?
Though the portfolio has been wildly up and down throughout
the entire course of its existence, the net volatility has
been upward during these 22 months. Rooted to the core in
the SAFETY of Gorilla Gaming fundamentals, the Front Office
Software Game that began with $10,000 is now valued at more
than $50,000, having increased at an average annual rate of
160%.
The Numbers
History
History Year Annualized
Gorilla Game 400.90% 22.61% 159.79%
Nasdaq 153.35% 12.38% 73.47%
S&P 500 34.95% 2.00% 19.44%
Russell 2000 16.44% 6.80% 9.44%
The numbers continue to speak for themselves. Even though
the Nasdaq advanced an unbelievable 85% last year and will
be up 60% again this year if it continues at its current
rate, the Front Office Game has more than doubled that
index's unprecedented performance.
Now the details of the two stocks still remaining in the
Game:
5/25/98 5/1/99 Change
% of Buy Buy Average Current from
'Folio Price Price Cost Price 5/25/98
RMDY 18.9% $17.44 $17.50 $17.46 $42.13 141.54%
SEBL 70.1% $11.50 $19.22 $13.55 $119.44 938.59%
It's no surprise that Siebel, the Gorilla of the huge, CRM
market, has grown much more than Remedy, the dominating
chimp of the much, much smaller internal help desk market.
By the time we celeebrate the 2nd anniversary of the Game,
I just might do something about Remedy's drain on the Game.
The final numbers:
Stocks $44,592.75
Cash $5,497.58
Total $50,090.33
The important stuff:
The Game was begun on May 25, 1998, with $10,000 using
not-real money. Though $8 commissions are accounted for,
interest earned on the cash is not accounted for because
the material lessons we could learn from watching the Game
in progress would be no different if we did account for them.
The really important stuff:
I own shares in Siebel Systems. I've owned long and/or
short positions in both of the above stocks as well as
other front office stocks and reserve the right to do so at
any unannounced time in the future.
When I met the gang in San Diego, one of the precious
moment ocurred when a lurker thanked me for the work I do
here and elsewhere in the folder. Concerned that she was
following my comments too closely, I was reassured when she
explained that she does her own research. At that moment
another lurker quickly repeated verbatim my monthly closing
comments about the Game that continue to apply today: "Do
your own homework. Don't make any investment decisions
based on the stuff that comes from my keyboard."
I do hope the two people who joined straightlife and me in
that brief conversation see this. It was a joy meeting the
two of them. But if I told you who they are, I'd have to
kill ya. :) Right, straightlife?
--Mike Buckley |
