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

To: Bruce Brown who wrote (39431)	2/17/2001 11:11:10 AM
From: gingersreisse	Read Replies (1) \| Respond to of 54805

One more thought on asset allocation and the LTB&H strategy. An asset allocation model tempers the gains made in periods of roaring gains ("selling tech" in '99) with a practice of picking from the best of currently lesser performing classes (mid-caps and energy in '99, for example). It also forces me to consistently evaluate which of my current holdings could be sold for the reallocation decision, which is sometimes the most difficult decision in a period of generally rising prices. The euphoria of surging prices in one asset class may blind us to assumptions which may now be stretched. By holding 30-35% max in tech, I'm forced to sell and invest in other asset classes precisely as prices surge. I'm now in the position of being forced to buy tech (adding JSDU, NTAP, BRCD, CREE. EMC) just as I was forced to sell (by writing expensive calls) a (too) small amount of each late in 2000. I didn't sell the QCOM then, because I felt opportunity was about to unfold. My model has been 30% tech, 35% S&P/midcap/energy/etc, 30% fixed income since the 1980s. There's another 5% which can be distributed where appropriate. Energy's done well, and I'm lightening up there as that class bumps against its upper limit. That money is going back to JDSU, etc. UF has often made the point of keeping your winners through LTB&H, and it's an important lesson. A process which forces you to examine and prune is a complement to that lesson. Looking back, I can see a model of 65% tech since 1985 would have given me a much greater total dollar amount, but would have required me to make many more decisions, be a better market timer, and probably get a lot less sleep... GSR

To: Bruce Brown who wrote (39431)	2/17/2001 11:51:15 AM
From: lurqer	Respond to of 54805

That means we, as investors and gorilla game stock pickers, have to be even more prudent and strict in our focus on the few, rather than the many. Whether it be in the mature tier of confirmed gorillas or the younger age, emerging companies within specific niches. Those companies are out there and stock pickers should be focused on them - even as the carnage unfolds. If I'm correct that the Dent demographic wave won't trigger a massive p/e compression for about another half decade, then we may well have that "stock pickers market". Referring again to the chart, I'm ignoring the '29 debacle since I believe the rapidity and duration of the decline were profoundly Fed induced. Using the '70's as a model, subsequent to the "stock pickers market", there is a stock avoidance market. During this period it simply doesn't matter how good the company is or how fast it's growing. The overwhelmingly dominant component of the stock's price trend is its p/e compression. This is exhibited on the chart from the '73 to '82 period. That was a period of considerable innovation - e.g. the whole microcomputer phenomena. It didn't matter. Stock prices went down. All rallies failed. And p/e's kept compressing. Since I believe tech stocks a particularly vulnerable, I guess I'll have to investigate natural resource stocks, selected REITs and (horrors) gold mining stocks. <gg> lurqer

To: Bruce Brown who wrote (39431)	2/20/2001 8:33:38 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Bruce, How is the original gorilla game 'test portfolio' doing since September of 1997 that the authors used as a model example in the original book? I understand your point and I know you understand its limitations, but for those who have only read the revised manual I'm compelled to point out that the list of stocks you're tracking were selected as part of a Gorilla Game that stopped being played very soon after it was begun. Some of the stocks on it (most notably, MANU) wouldn't be on it today if the Game were still being played by the authors. --Mike Buckley