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

To: hueyone who wrote (39476)	2/18/2001 9:57:52 PM
From: tinkershaw	Respond to of 54805

On a different note, if you are now taking any graduate level courses in security analysis, I hope you will share any important insights you glean with the thread Huey, Great snippet. Puts in great perspective the financial underpinnings of gorilla investing. In regard to security analysis, the one thing I found at MBA school, is that the entire class of theories and mathematical models involve what is called the "market portfolio" and involve managing large sums of monies with some sort of "portfolio theory." Not very useful to the non-portfolio or non-hedge fund manager (although very valuable to people who are). I can also mathematically explain how to calculate and conduct a risk-free international monetary hedge. Again, hardly the sphere of gorilla investing. But one thing I have discovered of great value, is how to value a company for M&A purposes. In this regard ROIC and growth are the two most important variables. You get a company like Juniper with an ROIC of 131% and growing at 100%+ a year (500% last year) you get an awful lot of wealth creation. This is where gorilla investing comes in. Technology companies with gorilla characteristics have such high barriers to entry that they can swipe and hold these enormous ROICs without fear of competition moving in to reduce these rents. When you combine this with the tornado (enormous growth), you can see where unprecedented value creation is made by gorillas. No other sort of company can combine these high growth rates with this enormous return on invested capital....IE, MSFT, CSCO, INTC, ORCL. Huey, glad you found the article helpful. I recommend all partake of it because it explains the financial metrics behind gorillas that is very helpful in picking amongst true gorillas and picking out the pretenders. It is also helpful in determining when a gorilla begins to lose some of its power over the market. You can see it, as an example, with Cisco over the last 18 months or so. Tinker Hey, did I mention to anybody that Seibel has an enormous 173% ROIC? Not that Mr. Buckley needed more good news about Seibel.

To: hueyone who wrote (39476)	2/19/2001 12:43:07 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 54805

To all: I haven't had anything to say on this thread for a while, so I haven't said it. But I've been lurking, and I wanted to thank you all for the quality of the discussion. I'm glad to see that the thread has taken up the subject of Valuation (sign of the times :)). I'm double-plus-un-glad to report that my habitual focus on Valuation has not spared me in this downturn. I was 70% cash for the first half of 2000, and then misjudged that the time was right to jump back in. A tad early, as it turns out. My largest purchase was a Value stock, well managed, good longterm track record, good balance sheet (debt a bit high, but a large secure cash flow quite adequate to service the debt and fund expansion), good prospects for solid (but not Gorilla-type) growth, PEG much lower than any of the Gorillas. I loaded up on Worldcom at prices between 40 and 30. Ughhh. Let me say that again, as it expresses my feelings perfectly. Ughhhh. While Growth investors learned the pain of 200 PE stocks going to 20, I (the Value Investor in Safe Stocks) learned the pain of 20 PE stocks going to 2. Relatively speaking, there isn't much to choose between those varieties of pain. Value is not a synonym for safety, and forward earnings estimates are a moving target for all stocks. However, the other 2 of my 3 largest purchases last year are doing OK (CMH, average cost 8.1, now 13.4; and QCOM average cost 67, now 81).