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

To: Mike Buckley who wrote (36540)	12/12/2000 7:46:31 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

I love it! With all the talk of AMD's success as evidence that Intel is not a Gorilla, I just learned something about the degree of their success from a Fool article: "On track for its first profitable year since 1995, ... to maintain profitability it must overcome the recent cancellation of the Mustang chip and delays in chips for notebook computers." For complete context: fool.com --Mike Buckley

To: Mike Buckley who wrote (36540)	12/13/2000 12:55:21 AM
From: tinkershaw	Respond to of 54805

For those interested also in another Fool's take on free cash flow: fool.com; Mike, watching cash-flow and the balance sheet have become my most important financial metrics. I have even found myself not even bothering to check the income statement. Why is this so? (1) theoretically, the price we pay for a stock is based upon how much cash that company will have in the future to pay us dividends in the future sufficient to compensate us for the stock price we are paying. Take Barnes & Noble, this company has been immensely profitable forever. However, at least since the last time I looked about a year ago, the company has always had to reinvest more in the company in infrastructure than it has ever earned in profits. Net results = $0 available to distribute to shareholders. Compare that with GMST or RMBS or the future QCOM or MSFT who have relatively minor capital expenditures. Practically every dollar of profit is available to distribute to shareholders. These companies may (or may not) be as profitable as Barnes & Noble, but they have a ton more dough available to distribute to shareholders in the future. This is essentially why (other than the dot.com mania) why AMZN was, and still is, so highly valued. At one point in time AMZN was almost FCF break-even. Something which Barnes & Noble never achieved. It is (or was) envisioned by knowledgeable investors that AMZN, unlike most retailers, would be immensely free cash flow positive. Therefore accounting profits were irrelevant. The problem of course is that this did not pan out. AMZN's FCF numbers kind of petered out and now look much more speculative. So when assessing between King's and Gorillas, and taking a long-term view, along with all the qualitative aspects we look at, looking at the FCF potential is also valuable if you have to pick and choose. Tinker