Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Network Appliance -- Ignore unavailable to you. Want to Upgrade?

To: Mehitabel who wrote (4338)	9/10/2000 2:55:39 PM
From: DownSouth	Read Replies (1) \| Respond to of 10934

Interested in any comments/discourses you have on the process of choosing investments. Hehitabel, you know that I am a Gorilla Gamer, so the valuation metrics are much less important to me that the company's products as seen through the ggamer lense--barriers to entry, open proprietary protocol/standards, disruptive innovations, quality and vision of management, market growth, sales/marketing effectiveness, etc. Valuation, for me, then becomes a means to monitor the company's success over time, not so much a means to pick the investment. Remember that ggamers tend to believe that the market consistently underestimates the value of a gorilla by using metrics while ignoring the strategic value afforded by the traits I listed above. NTAP fills all the qualities of a Gorilla in a series of tornadoes in a market (storage) that is exploding and will continue to burn furiously for many years to come. Another is QCOM, (of course), whose stock got driven up by exhuberence and brought down by FUD. Tremendously undervalued. Incredible future. (Couldn't let the opportunity go by without mentioning Q.)

To: Mehitabel who wrote (4338)	9/18/2000 2:52:23 AM
From: kas1	Read Replies (1) \| Respond to of 10934

Kas, I would be very interested in hearing what valuation measure you believe to be appropriate for extremely high growth stocks These things are never easy. For these stocks, I don't like any simple ratios. Yes, I look at fundamentals -- how the business is doing, how sales are growing, and so on. But unlike some others, I do not believe in "growth at any price" -- I do not believe that a high-growth stock should be purchased no matter what the price asked. The metrics I personally use are rather primitive. They're what work for me; others may work for other people. I take a look at how much money the company made recently. I estimate how much money I think they will make in five years. There is a lot of extrapolation (polite term for "wild-ass guessing") involved. Then I make a little Excel table of what the company's stock price would be in five years, given those profits, and given say ten different P/E ratio scenarios, from 20 to maybe 150. This does not provide me with a prediction -- by nature, it will provide me with several competing predictions -- but it lets me just scope out the event horizon. I have a lot of other personal rules, more exclusionary than inclusionary, which probably are just personal biases, but which I'll share anyway. I never buy #2 companies. (AMD) I never buy companies with integrity problems / legal problems / scandals. (LGTO, AVNT) I never buy companies with flamboyant/high-spending CEOs, or CEOs whose personality is tied in to the company's image. (AMD, ORCL) I never buy companies with which I would never myself do business, and I never buy companies whose stocks are bought mostly by retail investors, not institutionals. I never buy companies I hear people discuss at Starbucks. I never buy companies mentioned in the pop financial press. Again, these are my superstitions. You can probably do fine without them. Inclusionary rules? Companies that sell expensive things which have no viable substitute: NTAP and JNPR fit the bill perfectly. It impresses me when a company can sell a box full of chips and code for over a million bucks. Proprietary code, or intellectual property as the value-added. Relatively inactive SI chat boards. Engineering PhD's running the show. CEOs who live quietly and make it explicit that they are the shareholders' employees (something which always impresses me about Bill Gates's public utterances: the reverent tone with which he speaks of "the shareholders"... and yes I know, he's the biggest one, but still.) Well, this has turned into a bit of a diatribe on my personal investing style, but maybe it will help someone here. I am certainly very eager to hear what others have to say. I am always, always learning.