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Strategies & Market Trends : Portfolio Protection + Money Management for the Long Term -- Ignore unavailable to you. Want to Upgrade?

To: BDR who wrote (1)	4/8/2000 1:48:00 PM
From: BDR	Read Replies (2) \| Respond to of 57

OT (Already? This is only the second post!)- I don't want to turn this into yet another stock picking thread but I think the portfolio that one is going to hold long term and protect needs to be on solid footing. While I think a hedging strategy can be applied to a portfolio in any sector it would make sense, if we are talking about risk management, to turn a cold eye on the components of our current portfolios and eliminate the riskier residents that may be impossible to hedge. A portfolio of dotcoms and dotbombs is going to be very difficult to protect except at great expense. I am not endorsing the following or claiming that my own portfolio adheres to the following guidelines but it is not a bad place to start, at least in the tech sector: <<<<<<<<< redherring.com Here are the new new rules: 1.The weak are toast. Are you meek in soul, poorly capitalized, or unreasonably leveraged? Can't handle volatility? If these attributes apply to you as either an investor or a businessperson, forget about it. Get a day job. Buy treasuries. 2.Every company is a startup. A great company is only great on the day it announces a great quarter. The day after its earnings announcement, it's a startup again. 3.A company that has never shown a profit should never be valued over $20 billion. 4.Avoid companies in which the executives regularly brag about their market capitalizations and implore the public to buy more of their stock. Especially if these companies are breaking some of the other rules. 5.The $5 billion/$100 million rule: companies with less than $100 million in projected annual revenues are not allowed to have a market capitalization of more than $5 billion. This, of course, requires more analysis of the growth rates, but enforcement of this rule maintains a bare minimum sanity level for the general growth paths of technology companies. It also provides a disciplinary framework for taking profits. 6.Real technology markets matter. Examine the company. Invest in companies that are real technology innovators with rich customers. Is the company supplying complicated, proprietary networking gear to deep-pocketed telecommunications vendors or is it experimenting with avant-garde business models for selling beauty products over the Web? If it's the latter, it's in trouble. >>>>>>>>>> Some will feel that the whole tech sector is now and has always been inherently risky. One currently popular approach for use in the tech sector is outlined in The Gorilla Game by Geoffrey Moore (http://www.amazon.com/exec/obidos/ASIN/0887309577/o/qid=955168691/sr=2-1/104-5960529-3860459) but if you want to discuss the Game please go here: Subject 25851

To: BDR who wrote (1)	4/9/2000 12:03:00 PM
From: Tom Trader	Respond to of 57

Dale -- glad you started the thread As you know I did try and raise the issue on the G&K thread but did not find much interest. Let me start by providing a link to response that I posted in the context of someone who raised the issue after last week's upheaval. Message 13372758 I think that the issue of portfolio protection/hedging entails several components: -the timing of when to take action -the extent of protection that one seeks -the specific instrument that one should use to achieve protection -the extent to which one is willing to sacrifice potential upside in the process of initiating any such action -the expectation of returns that one would seek to achieve -the tax consequences of hedging/portfolio protection strategies. There may well be other components that need to be considered. I have a luncheon appointment but hope that over time, we can discuss these elements on the thread. I shall be pleased to offer my thoughts as discussion on the thread evolves.