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

To: Stock Farmer who wrote (47773)	10/11/2001 3:45:37 AM
From: Seeker of Truth	Read Replies (2) \| Respond to of 54805

One item, John. Both you and Pirah have said that we should subtract all investment in production facilities or in acquiring other companies from the cash flow. I'm bewildered. True, for some companies the investment in production facilities is a yoke around their neck, something they must continually do without increasing the profits. This is typical of a heavy industry company. But for other companies investments can really pay off. When Microsoft bought their operating system from a little company should that expenditure have been subtracted from profits? One does get the feeling that reserve cash is important and over the long term it should increase. But surely there are periods when some very wise investments are being made and the reserve cash is being somewhat depleted rather than being added to. Do we say that the company's cash flow is decreasing in such periods?

To: Stock Farmer who wrote (47773)	10/11/2001 11:24:02 AM
From: Thomas Mercer-Hursh	Read Replies (2) \| Respond to of 54805

So your comment about "only one" purchase decision and "only one" sale decision is extremely appropriate. It is vitally important to get each of these correct with a LTBH position, because barring an exogenous event, you really only have one of each. Two conclusions therefore: (a) it's important to appropriately "time" entry if you only have one crack at it, and similarly to "time" exit; plus (b) if a terribly appropriate exit point appears, it is worthwhile answering the door when opportunity knocks. Which is hard to do if it's not important to know what knocking sounds like. First let me note that I really should have qualified the one buy, one sell remark. There is nothing about GG or LTB&H that argues against building up a position over time or liquidating part of a position to re-balance a portfolio or take advantage of some new opportunity. The real contrast I want to make is between accumulating in the beginning and selling at the end versus moving in and out of the stock. That clarified, I would disagree with your point that since there is only one event of each type, that it is vitally important to time those events carefully, even if we are dealing with the "pure" case of a single one of each event. Looking at CSCO, our classic rollercoaster, does it really matter a lot exactly when it was that one bought as long as that time was four or five years ago? Sure, there is some difference in return depending on when exactly one made the purchase, but the main issue is that the overall growth in the stock over the long term swamps the short term movements. Timing is clearly critical for a short term hold since one can't expect that kind of broad secular growth. Your question: "Not having found it yet, the question is what one does until it is found" is extremely relevant. I would hire a professional money manager What makes you think any of them know? Even if you think so, I sure don't. I am quite capable of doing my own calculations and I am far more likely to believe the results if I have made my own decisions.