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

To: Uncle Frank who wrote (40204)	3/10/2001 5:43:39 PM
From: Thomas Mercer-Hursh	Read Replies (1) \| Respond to of 54805

His approach is to locate entry points in great companies based on valuation, and then hold on for the long term, but keep in mind that his model doesn't include tech. My approach is to locate entry points in great companies based on the position of its products in the talc and then hang on for the long term. It seems to me that this is an absolutely key distinction which is often over-looked or blurred over by GG-bashers. Because Buffett deals with old economy companies, there is no reason to expect them to undergo dramatic, phenomenal growth or for them to dominate a sector other by long term plodding. The reasons that these companies succeed is not because they make a product which no one else can make, but because they make it cheaper or better, their marketing is better, and/or just because good management provides consistent and appropriate direction. In tech, however, we have a significant number of companies that grow at absolutely phenomenal rates and frequently rise to dominate a sector in amazingly short periods of time. This happens exactly because of the product. Of course, one still needs the sales and marketing and management and, particularly the value chain building but the product has a significance in these companies which is entirely different the the product distinctions in old economy companies.

To: Uncle Frank who wrote (40204)	3/10/2001 9:19:59 PM
From: A.L. Reagan	Read Replies (3) \| Respond to of 54805

re: Buffett: but keep in mind that his model doesn't include tech This post-snip, and a few others like it, perhaps highlight the fallability of certain investing practices, versus Gorilla Gaming itself. In his shareholder homily, Buffett's point was that the real metrics of investing haven't changed in thousands of years, regardless of whether the steam engine, the railroad, the automobile, the radio etc. had the masses believing "this time it's different" or "we are in a new economy." The principles of gorilla gaming were used by Warren Buffett long before Christianson & Moore. One of Warren's more celebrated investment successes was with Coca-Cola years back. With KO, Buffett found GG characteristics such as: proprietary IPR (the formula), immense value chain, barriers to entry, and, with international expansion, some tornadic markets. Warren bought KO cheap and sold it high. Ditto with a number of other consumer products companies with sustainable competitive advantage periods. To the extent the field manual authors led readers to believe that the rules were radically different because it was "tech" or "the new economy" they did a gross disservice. To the extent they emphasized CAP and GAP and tornado-style markets, the advice was spot on. I don't think G Gaming and Buffett investing need be mutually exclusive. Buffett has made numerous comments that his group was unable to pick through the boiling turmoil of tech companies in order to pick out the very few with sustaining competitive advantage. TRFM provides a useful and valid way to do this. But Buffett was right. There is no "new economy" with its own set of rules, and this time, it's not different. We live in a world of limits, and it is human nature to push the limits, so we soldier on.