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

To: Tom Chwojko-Frank who wrote (42288)	4/30/2001 11:55:52 AM
From: Jurgis Bekepuris	Respond to of 54805

Tom, >6% growth in the market (is that S&P? Dow? everything?) I don't know what Buffett meant. Most likely he meant earnings growth which could be equated to "average return for investor" assuming index fund. >does not equate to strong companies growing at 6%. Some > will grow faster, some slower (or shrink). Buffett is essentially saying he things > over some time frame, the good companies will have growth between 6 and 15%. > Only a few really exceptional companies will beat 15%. Yes. I agree with this interpretation. >The question is, can one carefully choose stocks that will be on the faster growth curve? Yes. But... >Finally, is there some reason you don't believe gorillas and kings will >outperform the market, in the long haul? Or that >the G&K's are the really exceptional ones? Assuming that Buffett did mean "2-3 companies out of Fortune 500", this is much smallet than G&K portfolio. In addition one of two may be non-tech company. Which leaves us with 1 candidate for over 15% annual growth. Hmmm. Not very exciting. :-((( To paraphrase. I agree that G&Ks will outperform other companies in earnings growth. However, assuming Buffett's scenario, G&Ks may grow at 10% annually. Which is much less than any tornado, hypergrowth, whatever you call it. The scenario does not preclude tornadoes, it just means that tornadoes are shorter in length and yield less true earnings (e.g. QCOM or JDSU - who can calculate their free cash flow and ROE without spending couple of weeks in financials) and may lead to earnings and sales collapse (ala Lucent, Cisco) at the end. That's why I suggested my 30% up, 60% down scenario. Jurgis - just being devil's advocate.