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

To: John Stichnoth who wrote (36195)	12/7/2000 9:33:10 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

John, Regarding the discussion of PEGs, you and I agree almost entirely. I'd like to highlight a couple of the things you mentioned with the hope that clarifying issues for the valuation-challenged among us helps a little bit. you can't set arbitrary 1.2, or 1.0 levels to look to get out of or into stocks (plural). At the least, the PEG targets should be set individually, by stock. The PEG for two companies should be different for two companies with equal projected growth rates, depending on other factors, such as "sustainable competitive advantages and market opportunities". Yes! I hope that sinks in for everyone. It makes me wonder if I accidentally mislead people here when I mention that I justify a PEG of 1.5 as a fair-value threshold for a strong Gorilla. That's only a point of departure. If a Gorilla or Gorilla candidate is relatively weak or strong in my mind, I'll adjust that PEG upward or downward. PEG doesn't capture the CAP of a stock. By that I assume you mean the value of the CAP. I agree. Ironically though, it's a proxy for a discounted cash flow analysis. In that sense, it's supposed to capture the value of the CAP somewhat. But I agree that it would be a stretch to say that it does. as cash comes available, the stock that has the lowest valuation, partially measured by PEG, relative to its historical valuation might be the most attractive investment. Thanks for giving me reason to pull the ace out of my sleeve that I've never used against Frank when he insists that valuation isn't as important as I think it is. Let's assume an investor has disposable cash to invest. S/he is happy with the stocks s/he already has in the portfolio and doesn't want to add any new stocks. Determining the stock with the most attractive valuation would be a great way to decide which one(s) to add at a particular point in time, notwithstanding the other issues of portfolio management of course. --Mike Buckley