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

To: Uncle Frank who wrote (34152)	11/1/2000 12:03:45 PM
From: Bruce Brown	Respond to of 54805

Warning: This is a double post as I put it up on the Fool GG board as well. Hey, I'm bored today. It's a holiday here in Europe and the wife took the kids to the circus as we only had three tickets and it was sold out. I'm missing all the poodles, horses, clowns and jugglers.... I was shopping at Amazon.com this afternoon for some Santa Claus stocking stuffer videos and ran over to read the reviews on "The Gorilla Game". I found one of particular interest and thought it was worth an update. Objectively, this book picks losers, April 22, 1999 Reviewer: A reader from Silicon Valley, California This is a surprise to me--pretty much everything suggested in this book makes a great deal of sense to me. It ought to help you pick winners. But at the tail end of the book, they list 4 sectors to invest in. Leaving out the grandfather gorillas (Microsoft, Cisco, Intel: do you really need a book to tell you they are good investments) and Internet browsers (yet another excuse to buy Microsoft), they list two areas for investment: Supply Chain Management.... In the 18 months since they wrote that chart, the best of the Supply Chain companies is +32%.....In an 18 month period when the tech sector was booming, following the advice here would have lost you money. If the goal here is to teach you how to pick the next Microsoft or Cisco, empirically this book fails to do it. Let's bring that up to date using the closing prices for SCM players between April 22, 1999 and October 31, 2000. i2 Technologies (ITWO) 4/22/99 - $30.75 (split adjusted $15.25) 10/31/00 - $170 17 month return since that review = 1,015% Manugistics (MANU) 4/22/99 - $7 7/8 10/31/00 - $113 15/16 17 month return since that review = 1,347% Here's a two year chart of the gorilla and the chimp in SCM: finance.yahoo.com I thought that this was an interesting review to revisit in light of the comments that were made by the reviewer - "objectively, this book picks losers" -- "If the goal here is to teach you how to pick the next Microsoft or Cisco, empirically this book fails to do it." Keep in mind that gorilla game investing is a long term proposition. BB

To: Uncle Frank who wrote (34152)	11/1/2000 1:00:41 PM
From: tinkershaw	Respond to of 54805

Use of margin represents a huge and unnecessary risk, particularly at the levels you are employing Actually my margin was calculated so that I could lose 1/2 the value of all my stocks and still not have a margin call. Who would have planned on GSTRF and RMBS on back to back days. Truly amazing. But, even after this I did not receive a margin call. And my sale of 5% of RMBS and actually just 4% of RBAK (at a profit) was just to reduce a margin. I have since tossed new cash in and have increased my net RMBS position by 7% and RBAK remains as is. As it stands now RMBS could fall to $20 and RBAK to $70 before I'd have to pony up anymore money (as these are the only two stocks in this account). And then I would only need about $2000 or so to cover. My total margin never exceeded 28% (even at the bottom), although it was up to 35% in this particular account (I have 3 accounts). So my use of margin was not excessive. But this little back to back surprise did push it to the limit. Lesson, even leaving this margin for error you never know what the universe will throw at you. So I do very much urge conservative caution with the use of margin. If you are going to use margin I'd recommend no more thna 25-30% and then only for very, very, compelling buying opportunities. Me, I'm addicted and will retain my strategy of growing out of margin. My mistake was getting a wee bit too greedy with Globalstar and too concentrated in my portfolio. Not that I'm doing anything about the concentrated portfolio (I prefer it that way) but back to basic G&K I go and shall stay. Hey, RMBS signed with Samsung;) Tinker