FAQ. Version 1.14. Last updated 04/30/2000.
1. Opening Statement: Welcome New Visitors to the G & K candidates thread.
Before beginning we'd like to make 4 points:
First, we wish you a warm welcome, and hope that your investing experience will be enriched by the effort it takes to become acclimated to this thread.
Second, everything you need to know begins with our header. We'll teach and show you how to make the fullest use of the thread as an investment guide, and we hope you'll follow the thread as you work your way through the header. Until you've done that, we request that you follow along with the current posts, but hold your questions until after you've completed the prep, which also includes a full reading of "The Gorilla Game" by Goeffrey A Moore.
Third, please don't confuse the total realm of hunting for potential Gorillas with the much more limited focus of this thread. That this thread is focused only on a portion of Gorilla hunting does not imply that people shouldn't address other aspects on their own or as part of another thread. For the purpose of achieving an informed discussion in this thread, we are purposely devoting our energy only to the aspect of Gorilla Gaming that involves a pure royalty or gorilla play in which a mass market, and a tornado already exists or will soon appear. We don't feel the other areas of Gorilla Gaming can be discussed along with our intended topics of focus without adding a lot of confusion, especially for the novices.
And fourth, we really do want you eventually to post. Now, we realize people lurk for any number of reasons and, if it is simply a question of being more comfortable listening and learning, then lurking is just fine. But it is important to realize that someone here must post, or we'll all end up looking a blank screen. So, if you lurk because you are not sure of what's going on, or you are afraid of being embarrassed, then that's a problem that can be fixed.
If you have a question, first check the header, or this message, and then, if you think it's necessary, check with a regular or two via Private Mail. I, for one, will be glad to help.
So when the time comes, please post.
2. Objective: To ease the conversion from lurker to poster.
3. Index:
....1. Opening Statement.
....2. Objective.
....3. Index.
....4. Definition of Terms.
....5. Frequently Asked Questions (FAQ).
....6. Thread Projects.
....7. Thread Resources.
....8. Closing Statement.
4. Definition of terms:
Basket of stocks = "A tactic to invest in a market of gorilla candidates, eliminating the need to guess which one if any will be ultimately crowned the winner." - Mike Buckley.
Bowling Alley = A tactic for those companies already across the Chasm, by which they hope to become the leading contender when and if the tornado starts. That is, it attempts to invade one niche market, or bowling pin, at a time.
BTE = Barriers to Entry. The wall Gorillas build around their domain. Ironically, Kings, do not build such barriers, and therefore their domains are that much weaker. "BTE" prevents potential competitors from competing with a Gorilla in its home domain.
btw = By the way.
CAP = Competitive Advantage Period.
Chasm = The transition a company must go through before its product's demanded by the mass market. Once across the chasm, a tornado (and possibly a gorilla) may develop. As Stockhawk has said: "The Chasm is that point in a company's development where tech-savvy early-market types have bought into its product, but the mass market is still not biting. On the other side of the Chasm lies the 'Bowling Alley,' where each niche market is seen as a pin to be knocked down. When enough pins fall a Tornado develops, which is the time of mass market adoption or hypergrowth (that's the fun part)." Not all "Shiny Pebbles" are able to cross the "Chasm."
Chimps = A company that is not a gorilla, or a monkey, in a Gorilla Game market. As LindyBill said it's "a company that tried to become a gorilla but did not get picked. IBM's OS2 is a prime example of a Chimp product. Apple is a chimp." Note: they do not sell the gorilla's product.
DD = Due Diligence. The care one must take when investing money. Gorilla game players are in no hurry to decide where to invest. We?re looking for good long-term investments and believe that it?s more important to make the right decision than it is to make a decision.
FUD = Fear, Uncertainty and Doubt. One of the reasons a good stock may drop on a no-news day. Occasionally, FUD's intentionally spread by a tribe of evil dwarfs (known as Shorts).
g or gg = grin or grin, grin.
GAP= The Competitive Advantage GAP. It represents the potential of a gorilla to generate superior earnings based on making a superior offering. See TRFM page 97.
Godzilla = See TRFM. A Godzilla company is "a hybrid between a King and a Gorilla that is riskier than a Gorilla because it doesn't possess enough of the Gorilla's characteristics." - Mike Buckley.
Gorilla = A company that owns the exclusive rights to a discontinuous, disruptive, innovation that the mass market must have, right now. They come in various types. For example, old "silverback" gorillas, such as Microsoft or Cisco, young gorillas (QCOM), and baby gorillas, such as (some believe) Gemstar. They develop in tornadoes, though not all tornadoes spawn gorillas.
According to Uncle Frank a Gorilla possesses the following characteristics:
1. Discontinuous innovation
2. Proprietary open architecture
3. High barriers to entry
4. High switching costs
5. Strong value chain formation
6. Tornado market extant or foreseeable
GG = Gorilla Game, as opposed to a King/Prince/Serf (Royalty) game. As LindyBill pointed out: "The Gorilla Game is a form of growth investing that focuses on High-tech, and specifically on product-oriented companies that sell into mass markets undergoing hypergrowth".
Header, The = The message from Uncle Frank that introduces the thread when you log on. It's also hoped that each message would come with its own subject header so that Erick's life would be that much easier (see Thread Projects below).
High Switching Costs = The flip-side of BTE. "HSC" prevents those already captured by a Gorilla from leaving its domain.
IMHO = in my humble opinion - uf
sixpak.cs.ucla.edu
IPR = Intellectual Property Rights: the actual bricks that make up the wall Gorillas build around their domain. However, for GG purposes only those patents that actually prevent a competitor from duplicating a product are important.
King = Not a gorilla. (And it isn't going to become one, either). As LindyBill pointed out a king is "the Market leader, properly with a two-times lead or better over its closest competitor. If the lead shrinks too far, the king becomes a prince, and we have a kingless market. Because they lack architectural control, and because switching costs are low, they cannot force competitors onto the defensive the way Microsoft, Intel, or Cisco can. Seagate is a king of hard drives."
LindyBill = Co-founder of the thread, along with Uncle Frank. He's also known as "Dancelot."
sixpak.cs.ucla.edu
LOL = laughing out loud - uf
LTB&H = the surest way to grow your portfolio - uf
(It's also known as 'Long Term Buy and Hold').
Main Street = In the fm, p35, Moore says, "the tornado lasts only a few years, perhaps three to five, the time it takes for the initial surge of demand to be absorbed, after which the market reestablishes equilibrium with supply. We call this new state Main Street. . . . "
Manual, The = "The Gorilla Game." Also known as TFM or TRFM.
Margin = The investor's version of Russian Roulette. The more you play with it, the more you risk having to liquidate your holdings at the worst possible time and incur permanent, quite possibly irreparable, losses. Carrying large amounts of margin, like holding large quantities of short-term options, makes it impossible to sleep or hold through downturns (which always occur, and which hit gorillas along with everything else). These approaches are thus incompatible with gorilla gaming.
-tekboy/Ares@dowhathesays,notwhathedoes.com
Momo Player = Momentum players. Investors who believe that if a stock increased 10% yesterday it's sure to increase 10% today. The comings and goings of the Momo players are one of the reasons for the volatility of the Nasdaq.
Monkey = A company that is neither a gorilla, nor a chimp, in a Gorilla market. It makes the "gorilla's product and sells it for less. AMD is Intel's monkey. Ascend and Fore are Cisco's monkeys" - LindyBill.
OT = off topic - uf
OTOH = On the other hand.
PM = Private Message - To send a private message check question "P" below.
Pongid = Gorilla-like. A term used by the grognards. (Just kidding.)
Prince = "A company that is not the market leader, but is big in its area. Princes are potential Kings. It's a market challenger, and potential co-leader." - LindyBill.
Prince with Attitude = For example, Dell.
ROFLMAO = rolling on the floor laughing my a$$ off - uf
Royalty Game = Not a Gorilla Game, but the parallel King/Prince/Serf game. This is a market without a proprietary architecture.
RTRFM or RTFM = Read The (Revised) Field Manual. The revised (second) edition of the "Gorilla Game."
Russian Army approach = Developed by LindyBill: reinforce your winners, sell your laggards.
(This strategy is similar to, but a more extreme form of, the strategy recommended by JDSU Chief Executive Kevin Kalkhoven, "never leave a party till the booze runs out. ")
Serf = A market also-ran, in a King/Prince/Serf market. "These companies fill out the low end of the market." - LindyBill.
Shiny Pebble = A term coined by LindyBill, a thread co-founder, an picked up by UF, to describe a new young tech company that was hot, but was way too early in its cycle to consider holding. The term came from Isaac Newton's "When I look at what I have learned about the Universe, I feel like a small child, walking along a beach, picking up shiny pebbles, while a whole ocean of knowledge lies before me." Some Shiny Pebbles, or Snowballs, can be found in the "Watch and Wait" portfolio (Year 2000 version). See 'Snowball' below.
Snowball = Some thread participants prefer this term to the more easily misunderstood 'Shiny Pebble.' They are synonymous.
Story stock = A company whose greatest ambition is to become a Shiny Pebble. When investing in these companies you not only get a stock certificate but an interesting story. Titan (TTN) is a prototypical story stock. (Think "Chicken-tronics").
TIA = Thanks In Advance.
TFM, TRFM = "The Gorilla Game," by Geoffrey Moore, Paul Johnson, and Tom Kippola. It's in a, revised, second, edition now (thus the added "R"). It actually stands for "The Field Manual" or "The Revised Field Manual."
Thread Bloat = A problem of "low signal-to-noise ratio, caused by a surfeit of mindless and/or irrelevant babble; something to be avoided." - tekboy/Ares
(Some of us are trying to post only relevant babble.)
Tornado = The buying frenzy that develops when large segments of the mass market must have a particular product, right now. (Think of Cabbage Patch dolls) And, to quote Mike Buckley, quoting the manual, a "consistently increasing rate of growth is an important symptom of a tornado." Also called hyper-growth. Some tornadoes, but not all, spawn gorillas. When a tornado ends a gorilla finds itself on Main Street.
UF = Uncle Frank - He's also known as King Arthur - Co-founder of the thread along with LindyBill.
sixpak.cs.ucla.edu
Value Chain = "A company's customers, suppliers and third-party marketers who rally around the company's proprietary architecture. They do everything possible to ensure the success of the proprietary architecture because doing so is critical to the success of all members of the value chain." - Mike Buckley.
VBG = Very Big Grin.
5. Frequently Asked Questions on the "Gorilla and King Portfolio candidates" thread:
A. What's all this talk about thread portfolios?
"There are two, the 'Gorilla and King,' and the 'Watch and Wait.' Both are in 'Year 2000' versions. To get to them, go directly to the top of this page. Click on the blue, underlined, 'Gorilla and King Portfolio candidates,' go down the page to the first hyperlink (the G&K Index) and click. To get to the 'Watch and Wait' portfolio, scroll down to the second hyperlink instead."
See message 13325 for more details.
B. Why aren't you using a basket approach to investing? Even Geoffrey Moore says it's a good idea.
"Obviously, we like Moore. But, we don't necessarily follow everything he says. After all, we're all free to invest any way we think best. And some of us believe a basket of potential gorillas dilutes our returns. (That is, all of the capital tied up in non-gorillas is, by definition, not in gorillas - where is should be.)
C. Why don't you consider 'X' a gorilla? It's a great stock.
"Gorillas are not just great stocks, they are great 'high return/low risk' - or virtual monopoly - stocks. But read the header for more details."
D. Could you please help me invest some money?
"No. We are all responsible for making our own decisions. (And, it's not appropriate to ask us anyway.)"
E. What is the best way to get up to speed on this thread?
"Read the header, read the connected links, read the thread (from the beginning, which I know may no longer be possible), and read TRFM."
F. Is all this work worth it?
"You be the judge. But, it is public knowledge that we discussed the advantages of holding QCOM in the spring of 1999, Gemstar and JDSU that summer, and CREE and NTAP last fall. Now, no one knows if this year we will be as fortunate, but with your help we're certainly going to try."
G. Who is Merlin, Sir Galahad, or Apollo? I don't remember seeing them post.
"Because the thread was seen by many as the Camelot of cyberspace, most of the original nicknames are Arthurian. But we ran out of names from Camelot and ventured into other mythologies."
sixpak.cs.ucla.edu
sixpak.cs.ucla.edu
H. How does a stock get on the W & W portfolio, or the G and K portfolio, for that matter?
"A befits the unofficial 'King Arthur and the Round Table' thread, via trial by combat, of course.
At the end of the year we promote stocks from the W & W to the G/K portfolio. JDSU was just promoted. In the future we hope to use the results of 'Project Hunt' (see below) to feed stocks into the W and W portfolio."
I. Is there a list of consensus Gorillas?
"No, but see the G & K portfolio for ideas."
J. Where should I start looking for new Gorillas?
In High Technology, it's as simple as that. Even though the search for gorillas is a frustrating one due to their scarcity and feels more like a search for Sasquatch rather than for plain old silverbacks, we must remain focused on where and how we search, with the payoff being worth the discipline. You can search for a gorilla in Miami Beach all you want but you ain't gonna find one, ever. Gorillas could have been comprised of other characteristics then the ones we are interested in, but they are not. Gorillas are giant dominant technological powerhouses and searching for them in another context is academically stimulating but futile. If that were not true we could stretch the G&K principles to, let's say, consumer goods. Heinz would be a ketchup gorilla. It has proprietary open architecture, because of its secret recipe. It has gorilla dominance in market share, because who buys anything but Heinz ketchup? So where would we draw the line? - 100cfm.
K. Isn't the GG risky?
"To a greater or lesser degree all investing carries risk. However, as our goal is to find 'high return/low risk' stocks, we believe our method is not as risky as it may appear to the uninitiated. As Uncle Frank said, "we specialize in sure things, which are hard to come by <vbg>.... The Gorilla gaming approach is to look for companies with strong technology positions, and try to evaluate the strength and durability of their positions. The fact that a company is "hot" in terms of its stock price has no relevance to this evaluation, though a rapidly rising stock price often catches our attention in the first place. One thing that we look for in both GKI and W&W candidates is profitability."
Now, does this sound particularly risky?
L. As most gorillas have a market cap of over $10 billion aren't they already known to the market? And, if so where's the advantage?
"Do your own DD. However, it's our belief that while gorillas may be known to the market, they are always fundamentally misunderstood by it. And, therefore, they are usually undervalued.
For example, once QCOM was declared a gorilla last spring most of us never thought of selling. We simply believed, no matter what out friends, co-workers, or brokers said, that we should never sell a gorilla. (In other words, you are being invited to join a community whose long time members held a stock through most of a 2,600% increase. Think about it.)"
M. This may all be very well, but I just bought a Gorilla and it went down. How come?
Gorilla stocks, like most other forms of investment, appreciate and depreciate over certain periods of time. And, in fact, no stock appreciates in a straight line due to any number of factors, including market conditions, Fed actions, Momo players, management decisions, FUD attacks, and margin calls. Our theory, however, is based on a long-term buy and hold strategy, and asserts that over any appreciable length of time a Gorilla's stock will outperform its competitors.
N. My friends say the gorilla stock price is too high. So I think I'll wait for it to split.
"If all that your friends know about a gorilla is its price, next time try not to listen to them. If, however, you think they really are experts, then don't listen to us."
O. What's "Off Topic" (OT) on this thread?
"The only thing off topic is rudeness. However, we would ask that any extended discussion not having to do with stocks be carried on by PM."
P. But how do I send a Private Message (PM)?
"Just click on the person's highlighted name on the main board. The resulting screen will have a private message link on the far right hand side. Click on it, and you are off and running."
Q. What do you think of the other Gorilla threads.
"We do not endorse, recommend or wish ill, any person or thread. To each his own."
R. How did you create all those neat bold headlines, and italicized answers?
"See message number 17558, by Joel Yagoda (Perceval). Also see Mike Buckley's message number 17308."
6. Thread projects:
"Project HUNT" - An organized hunt for new gorillas. See chaz (Thucydidies), message numbers 15465, and for a summary of its results see message 18187.
The results so far:
Company.....Author......Message Number of Final Report:
BVSN?.......James Sinclair..........15448
EMLX............buck................18151
EXDS..........Snasraway.............12458
HLIT.........Eric Jacobson..........16921, and update 23229.
INTF.........Mathemagician..........18015
RNWK...........Suprow...............18058
WIND..........John Huber............16648
ATYT...........SMACS................18213
KOPN............Voop................19842
ELON..........Janet_Wij.............19977
INSP..........techreports...........21563
WGAT...........Mishedlo.............21672
INFS........John Stichnoth..........21723
RATL..........Bob Wozney............21995
CHKP.........Eric Jacobson..........22663
PHCM..John Stichnoth and Susan Huebert..23473/23476/23478
Subject 33114
sixpak.cs.ucla.edu
"FAQ" - This message.
"Index of Important Messages" - See Erick, messages number 17208 and 17305.
"The Front Office Gorilla Game" - The results are posted at the end of every month. - See Mike Buckley's (Merlin's) message number 17759.
"Ownership Survey" - Contact Apollo (Snasraway). See post #11398 for information on the Personal Portfolio Survey of the G & K thread.
"Handheld Gorilla Game" - See Johnzhang's messages, number 17454 and 13597.
"The Registry of G/K Regulars" - See Tekboy's (Ares) message number 17216.
sixpak.cs.ucla.edu
sixpak.cs.ucla.edu
If all this seems too ambitious for now, why not become a 'beater'? Beaters, were sent ahead of big game hunters in order to scare game back towards the hunting party. In other words, simply search the web for articles about QCOM, JDSU, CREE, NTAP, PMCS, CSCO, BRCM, MSFT, EMC, GMST, NT, SEBL, or ITWO and bring the LINK back to the board.
7. Thread Resources:
George Gilder - The author of the "Gilder Technology Report."
Geoffrey Moore - See the header. The author of "Crossing the Chasm," and "Inside the Tornado." And with Paul Johnson, and Tom Kippola, the author of "The Gorilla Game."
Clayton M. Christensen - The author of "The Innovator's Dilemma."
8. Closing statement: So why do we need your help? Because while we believe we know what has to be done, there are just not enough of us to do it right. Or to quote LindyBill, "As we look to the future, we can pretty well pick out the technologies that will succeed. They are the ones that give us speed and information in the simplest possible way, and are the easiest to use. The evolution of the G&K board is following the same pattern. We are getting more useful information, faster, simpler, and in an easier to use format. This is because we have hit upon the right structure, and are attracting the right people, who are willing to do the work and contribute to our common goal, because everybody involved benefits from it.
The G&K Board the most successful, worthwhile, committee I have ever been on in my life!
This is a direct result, of course, of invention of the Internet. The G&K board is an example of one of the "Killer Apps" of the Internet. So, where do we go from here? What do we watch for? The same things we are looking for right now, of course."
So why not join us?
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I wish to thank all those who contributed to the composition of this FAQ. In particular, thanks, Uncle Frank, LindyBill, Mike Buckley, chaz, and DownSouth. In section 1, Chaz, the Master of the Hunt, wrote the first two paragraphs, and Mike Buckley wrote the third. The errors are mine, the credit belongs to the thread.
sixpak.cs.ucla.edu
- Fred |
