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

To: Mike Buckley who wrote (22293)	4/5/2000 8:03:00 AM
From: 100cfm	Read Replies (2) \| Respond to of 54805

In other words, do you believe valuations other than appreciating the stage of the product's adoption life cycle really don't matter? Mike that is a question I believe we could debate for a very longtime. We briefly discussed it in San Diego, the question then being are our Gorillas really worth their market caps or are their market caps simply the result of us and everyone else buying them at the sametime. I have been thinking about that alot. My conclusions are: 1. Anytime a sell off occurs in any stock or index the immediate reaction is it was overvalued. Overvalued is such a broad statement, for something to be overvalued it must be compared to something of percieved similar value. I'll keep using CSCO as my examples, when CSCO had it's 40% corrections I'm sure it was due to some glitch and a percieved overvaluation. But how do you compare CSCO to anything else, CSCO is overvalued compared to who or what. It cannot be done. So was there a time when CSCO was overvalued, If you are talking in time frames longer then 2 quarters I would say no. 2. I would say as valuation is concerned we need it to be on a sliding scale depending on the gorilla. All Gorillas are not created equal. Therefore valuation should be more of a concern with some Gorillas vs others. With CSCO being at the top of the scale and lets say SEBL being a much less powerfull gorilla at the bottom of the scale. In other words SEBL has the best chance of becoming percieved as overvalued with CSCO the least. 3. The hard part is what is the true value of the Gorilla. Even with SEBL it stands alone because it is a Gorilla in its field. So what do you compare its valuation with? You should not compare it to other monkeys and chimps in it's field and you certainly can't compare it to companies in other fields. If SEBL rebounds quickly to its former highs then I say it was not an overvaluation but an overreaction on the market's part. If it doesn't I would say it might not be a true gorilla but a strong king in which case it was overvalued. 4. Valuations can be compared among kings and princes but not gorillas, they are too unique. I think with a gorilla like csco valuation should not be a concern since it is impossible to determine a true value for such a company. Instead you focus on it's performance and execution as long as it performs you let it ride if it slips such as not overtaking a new market, lets say optical then you torque down your grip. So where does this all leave us. Hold the strongest gorillas with a death grip. Be overweighted in them. Hold lesser gorillas in a tight fist. Hold kings between your thumb and index finger and be underweighted in them and have a "this is a crazy price level" preset in your head. I will be watching how quickly and to what level sebl and ntap rebound to. Should they rebound quickly to former highs then I would place more weight to the overreaction theory, if they languish I will conclude they were overvalued but are now fairly or undervalued now. Then I will make my best guess at what level I would think they wolud be overvalued and would sell if that level whatever it may turn out to be is reached. Better to err on the side of leaving money on the table then watching it go down the drain. With CSCO and QCOM the death grip will remain. 100

To: Mike Buckley who wrote (22293)	4/5/2000 9:05:00 AM
From: slacker711	Read Replies (1) \| Respond to of 54805

The one reaction to the manual I've never bought is the idea that since Gorillas have always been undervalued by the market, they'll never get overvalued. The extension of that thought is that any time is a good time to buy a Gorilla. FWIW....this has always been the part of the book that I have been most uncomfortable with. If you make the argument that Cisco is fairly valued right now and it doubles in the next month, is it still fairly valued? Yes, this may occurr because of news on Cisco, but it is just as likely to occurr because of some sort of flight to quality by momentum investors. This would have nothing to do with Cisco's fundamentals..... I kind of like your approach Mike.....PEG's above 3.0 start to make me nervous. I probably won't sell, but I am very unlikely to buy. Slacker

To: Mike Buckley who wrote (22293)	4/5/2000 10:55:00 AM
From: areokat	Read Replies (1) \| Respond to of 54805

The one reaction to the manual I've never bought is the idea that since Gorillas have always been undervalued by the market, I think that we would wind up with an attempt to time the market.At the very extreme it might be possible, but most of the time you would just be playing probabilities. The problem, IMHO, is that there are two many other market forces in effect. Also, that old problem about fluctuations occurring quickly and most of a stock's price movements occurring in short time frames would nullify attempts at timing. My ITWO is underwater right now because it is a recent purchase, PSFT is about neutral because it was bought several months ago and MSF,INTC,CSCO and even BRCM are deep,deep in the green because they are LTB&H. Wish I could explain what I'm thinking a little clearer. Tom whoiswritingchallengedinmorethanoneway.

To: Mike Buckley who wrote (22293)	4/5/2000 11:47:00 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

RE: Valuation... Mike wrote: The one reaction to the manual I've never bought is the idea that since Gorillas have always been undervalued by the market, they'll never get overvalued. The extension of that thought is that any time is a good time to buy a Gorilla. My manual is on the shelf in the next room and I'm too lazy to strut down there to pick it up. However, didn't the authors make those comments in the context of a 'normal market'? Those of us who have been investing for a number of years might consider the move from the autumn of 1998 to a couple of weeks ago as a little bit outside of a 'normal market' - regardless of how much fun it was to watch the $$$$ increase. As the late, great artist Friedrich Hundertwasser said, "a straight line is godless....". The curved lines provide more thought, reflection and balance in life. So I'm optimistic that a little curve in all of our portfolio lines will be beneficial a few years from now. Perhaps the curve will, with time, connect the dots with the comments about the gorillas always being 'undervalued' by the market. Certainly i2 and Siebel recently and Qualcomm earlier this year have experienced more curve than the mature gorillas like Oracle, Cisco, Intel and Microsoft. BB