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

To: Thomas Mercer-Hursh who wrote (44718)	7/19/2001 7:31:15 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

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. Given the number of companies who have reported results showing the last quarter to be the worst yet, and who are saying things that make the next quarter sound worse, I'm not ready to share that assumption. But for purposes of this discussion, let's go with it. Even so, the likelihood of seeing another 80% drop from 33 is certainly not as high as it was at 120. I'm sure owners of certain companies held in the G&K Index thought that before, well you know. Take a look. , 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. The company is a gorilla. The stock isn't. The stock of a Gorilla is subject to the same ups and downs as any other stock. It can be overpriced, even at a current "low" and go nowhere for some time. It can be over, under, or fairly priced, and still fall when the other market participants decide it is too scary to hold. Just as being at a high doesn't mean it is bound to fall, being at a low doesn't mean it is bound to rise. 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. If the market perceives it as a gorilla and is inclined to give gorillas higher pricing, sure. But please keep in mind that you are making two sets of assumptions here - one on the business and one on the other participants in the stock market. For the latter, it is a good idea to have an extra margin of safety. This being true, a current value of 5, say, may be as attractive as it is ever going to get, no? If that were the case, then the upside would be accordingly limited. But I don't think that is the case except over relatively short periods of time. - Pirah

To: Thomas Mercer-Hursh who wrote (44718)	7/19/2001 7:40:12 PM
From: EnricoPalazzo	Respond to of 54805

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? As long as you don't start thinking, "well, with growth like this it will be a 5 within two years, and heck, a super-duper Gorilla like this will be priced at 10 in two years anyway!" Rigor matters.

To: Thomas Mercer-Hursh who wrote (44718)	7/20/2001 7:09:24 AM
From: 100cfm	Read Replies (3) \| Respond to of 54805

Remember that I am not talking about just any stock here, but specifically about a Gorilla. The market doesn't give a damn whether a stock is a Gorilla or not. If the growth rate going forward doesn't support the current PE, the stock will be taken down, simple as that. The market will not say "OH SBL is a Gorilla" therefore lets not trade it's shares down. Also why would second guess such a great management team, They have stated 12% growth going forward. You should base your assumptions on what they tell you. Isn't the great management team part of the reason of owning the company in the first place.