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

To: Thomas Mercer-Hursh who wrote (30732)	8/29/2000 8:20:12 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 54805

>> With all due humility in the presence of the founder Enough with the humility. Once you've been around here long enough, you'll realize that all I've done is build a place that will be attractive to smart guys like you so I can learn something. Just ask Buckley how smart I am; I followed that direction challenged mage into a linen closet twice in Las Vegas <lol>. Keep up the good posts, Thom. Even better, find a way to use those thought processes as a predictive tool so you can help me find a good place for the cash that's burning a hole in my pocket. After all, we are an applications lab. uf

To: Thomas Mercer-Hursh who wrote (30732)	8/30/2000 12:02:14 AM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

I don't that it is that they are not quantifiable, but rather that we haven't yet developed any very good tools for creating metrics for them....quantifiable? Ultimately, yes, just not with precision. I think that is pretty well put. But I don't think we need to develop any new tools. To the extent we wish to estimate value, any enterprise is worth the current (discounted) value of the sum of all future free cash flows. In other words, we have the tool, it is merely an imprecise tool because we are attempting to see the future. All we can do is to attempt to be consistent in how we set upper and lower bounds. It's OK to calculate values, so long as we don't delude ourselves as to their accuracy. The question is when do we even attempt the exercise. If we are buying a good number of gorillas (or gorilla candidates) at a time, then it may not be worth the effort to some. If we are buying just one for some reason, such as maybe through monthly investing, then it is probably a little more worthwhile. Some people don't think it is ever worthwhile, and to them perhaps it is not. Our time has value to us. For what it is worth, doing simple estimations of value using free cash flow has shown some gorillas and kings to be undervalued. When I first invested in them, QCOM and EMC were certainly undervalued by this standard, though in full disclosure QCOM was not yet a gorilla and at that point I hadn't read the book. Would I have done better with other G&Ks? Now that is too much work to figure out; I'll admit to being lazy. But certainly I felt more comfortable with their stock price's gyrations (especially QCOM's), which made holding, and buying more, easier at that time. - Pirah