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

To: 100cfm who wrote (24811)	5/15/2000 8:41:00 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

No wonder he gave the speech he did in San Diego... No, folks. I haven't forgotten about my promise to paraphrase the highlights of that presentation for the people who didn't purchase the video. I just got my replacement video today and haven't had a chance to watch it. I'll get around to creating the text version soon. Seeing a lot of peoples' comments, I'm sensing that there are more novice investors following and participating in the folder than I thought. A lot of people are buying individual stocks for the first time, either because they are brand new at investing or because they recently ventured from the world of mutual funds to the world of hand-selected stocks. If you fit that profile, please read the rest of this post and give it due consideration. Just as David Gardner repeatedly mentions that his Rule Breaker Portfolio at the Fool is probably too volatile for most people, I think that's probably also the case for portfolios largely made up of G&K stocks. Let me repeat that: I think a portfolio largely made up of G&K stocks is too volatile for most people. Is that blasphemy? No, it's simple recognition that high-tech stocks are especially volatile. Considering that Gorillas and Gorilla candidates are often operating in pre-tornado and tornado periods, volatility is a given. Acknowledgement of what might even be rightfully called extreme volatility is a must in my opinion. Not being able to withstand volatility is not a weakness. Speaking of someone who can't ignore the rapid, downward spikes is not a criticism. For the same reason you wouldn't get me to ride a roller coaster or a motorcycle, some people simply hate the rapid changes of a hugely volatile portfolio. There's nothing wrong with it. But if extreme volatility genuinely bothers you, you owe it to yourself to do something about it. If you're not comfortable with the level of volatility that must be endured among the G&K stocks, I believe there are three reasonable choices: 1) Don't invest in them; 2) Allocate a smaller portion of your portfolio to them; and/or 3) Brush up on the basics of investing over at the Motley Fool site. About item #3 ... If you don't know how a PEG ratio works (by that I mean, if you only know how to calculate it by plugging in the numbers at a website calculator and don't understand the PEG's various components and how variations in each component affect the other components), if you don't understand all that you really should learn it. If you can't calculate a Price-to-Sales Ratio (PSR) yourself, especially recognizing that the various data feeds are often wrong, and if you can't also calculate a Price-to-Enterprise Value Ratio, rush over to the Motley Fool and learn it. If you've heard about a discounted cash flow but don't really understand how it works and why investors consider using it, at least take the time to learn that stuff even if you decide later not to use it as a tool understand the companies you own. Rush over to the Fool and get down to the basics. If you can't write down the names of the three financial statements in the next five seconds, go to the Fool and learn the function each of them serves. Learn how to read them. They're not complicated but they do require the effort to appreciate the volumes of information in them, especially when you compare financial statements of the same or different companies. Why go to the trouble to do all that if volatility is troublesome? Because knowledge reduces fear. The more you understand the companies you invest in and the relative price of a stock, the more you'll be less inclined to endure ulcers when the stocks of some of the best run companies in America tank. I sincerely hope this helps the people who understandably hate volatility. --Mike Buckley