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

To: Eric L who wrote (25505)	5/29/2000 1:35:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

THE FRONT OFFICE GORILLA GAME: Celebrating the Second Anniversary That's right, folks! The only ongoing publicly monitored real-time Gorilla Game I've heard of began exactly two years ago on Memorial Day weekend. Feel free to burn a hot dog in honor of what I hope you believe is its educational value. What have we learned during the last two years? You'll have to answer that for yourself, but the most important thing I've learned is that playing a Gorilla Game in real time is not as daunting as I and many of my cohorts thought it might be when the manual was first published. We were concerned that it would be difficult to assess the importance of the various developments in the industry, especially to appreciate the importance when the events become immediately evident. Having gradually and methodically eliminated three of the four original stocks using rules #1 through #10 in the manual, I now see that playing the game by the book is not as difficult as I initially imagined. The second most important thing I learned is that the authors' recommendation of buying a basket of Gorilla wannabes is not necessarily a bad idea, as evidenced by the success of this Gorilla Game that did exactly that. I still believe an investor can do better by buying the leading candidate if one is leading by a wide margin at the time an investor begins playing a game. But in an applications-based Gorilla Game that is begun very early before a leader has emerged, this real-time scenario has convinced me that buying the basket is the only way to go because of the safety of the basket approach. (I should note that this game was not begun in the earliest stages of the front office competitive arena, now more often called the Customer Relationship Management (CRM) space.) In the enabling technologies-based games, there will often be only one or two major competitors, making it less of an issue for investors to consider. The third thing I've learned is that, as in the case of any investment strategy, luck can go your way that has nothing to do with the core strategy of gorilla gaming. The example in the case of the Front Office Gorilla Game is that we enjoyed monstrous returns from the relatively short-lived investment in Clarify. By sheer luck, the game was begun approximately at the same time Clarify's management began a successful turn-around of a company previously in serious trouble with a stock in the dumps. As the game evolved, Clarify was finally acquired by Lucent. In the mean time, the stock had increased 421% in only 17 months. What will we learn now that the game has only one stock in it? I suspect the Front Office Gorilla Game will show in real time the maturation of an applications gorilla in control of an ever strengthening value chain prospering in an industry expected to have much higher than average growth. The stuff we'll have fun tracking above and beyond the expected massive growth in the industry is whether new products constitute opportunities for new tornados (such as the mid-tier market) and the extent to which the Internet fosters growth opportunities not available to applications technologies of yesteryear. Most important, though, of all the past and future learning experiences is the incredible opportunity we have in the years to come to witness how the laws of long-term compounding affect the Game's returns. Where do we go from here? When I initially began reporting the events of the game, I did so on a weekly basis (in another forum before the G&K folder was launched.) As the game evolved and I learned from experience what was important and what was not, I shifted to reporting on it monthly. At this juncture in the game's evolution, it makes sense to me to begin reporting on a quarterly basis. I'll time the reports so they appear soon after the quarterly earnings (and revenue) announcements. Doing so inherently emphasizes two issues -- that the game now holds our attention for years without the need for weekly or monthly updates and that in the spirit of Rule #10, there will likely be far more news to be ignored than to grab our attention. These first two years have been one heck of a lot of fun for me. Thanks for allowing me to share the game with you. Without you the game would have been only educational, not fun. If a game isn't fun, why play it? The Numbers In this period when many people are experiencing significant short-term declines in their portfolio, the Game continues teaching us the vitally important lessons of exercising long-term discipline. Though the two years the Game has been played is a far cry from a long period, please notice that as impressive as the numbers below are, it wasn't always that way. The Game's value declined 40% in its first five months. Not a good start. Eleven months after it began the game was barely profitable (by only 3.64% to be exact). During that time the S&P 500 had increased 19% and the Naz had increased 38%. Nearly one year into the Game, an investor would have been as well off leaving the money in their brokerage's money market account. But a full two years into the Game, look at the results longer-term investing has brought to the table: Year-to History History Date Annualized Gorilla Game 353.12% 10.91% 144.81% Nasdaq 77.57% -21.24% 40.53% S&P 500 24.09% -6.21% 13.64% Russell 2000 -1.21% -9.39% -0.72% The stock of Siebel Systems, the lone remaining company in the Game, has suffered a 40% decline from its high during the recent tech wreck. Yet once again focus on the longer term: Current 5/25/98 5/1/99 4/11/00 Change % of Buy Buy Buy Current from first Symbol Portfolio Price Price Price Price Purchase SEBL 99.8% $11.50 $19.22 $104.94 $105.3 816.35% The final tally of the Game's current standings: Stocks $45,208.02 Cash $104.08 Total $45,312.10 The details for newcomers: The Front Office Gorilla Game was begun on May 25, 1998 with four stocks approximately equally weighted in total value -- Siebel Systems, Remedy Systems, Clarify and Vantive Corporation. It was funded with $10,000 in not-real money. Commissions of $8.00 per trade are included. Taxes are not included. Because the interest earned on the small cash amounts would not have changed the essential results of the Game, interest was also not accounted for. The really important stuff: I have owned long and short positions in companies that participated in the game as well as in competing companies in the same industry. I reserve the right to do so in the future with no advance announcement. I continue to own a long position in Siebel Systems. As always, do your own research and please, please do not make any investment decisions based on anything coming from my keyboard. --Mike Buckley