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

To: Pirah Naman who wrote (44715)	7/19/2001 7:00:01 PM
From: Thomas Mercer-Hursh	Read Replies (3) \| Respond to of 54805

One, what is the likelihood that our assumption of any stock being near a low is correct? Among other things this depends on our reasons for thinking it is a low. Up until this spring I think that a lot of people where thinking that lows must have been reached for no better reasons than that the levels were lower than they expected to see. My assumption, not universally shared, in posing the question is that now we believe that it is the economy which has hit a low point and that recovery, while not instantaneous, is indicated. Macro economic factors are certainly not the only thing that drive an individual stock lower and it should be clear that SEBL could stumble in any one of a number of ways and drive the stock lower without changing its longer term prospects based on its gorillaness. Even so, the likelihood of seeing another 80% drop from 33 is certainly not as high as it was at 120. Two, even if it is near a low, what does that tell us about its future movement? Remember that I am not talking about just any stock here, but specifically about a Gorilla. My suggestion, which will no doubt come as a total shock and surprise to you, is to look at the valuation, not the pricing. Not exactly a surprise! So, lets suppose that you have some metric such that anything below a 3 is attractive and anything above a 7 is unattractive. Given that we are talking about a gorilla, there is an expectation that the stock will, on average, ride high in the range compared to other stocks if the market perceives it as a gorilla. This being true, a current value of 5, say, may be as attractive as it is ever going to get, no?