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

To: chaz who wrote (48129)	10/20/2001 9:13:10 AM
From: 100cfm	Read Replies (3) \| Respond to of 54805

I look at companies like RMBS, NTAP, JDSU and I see real struggles going on in the hearts and minds of folks here and elsewhere who recognize potential greatness, see low prices, and realize that values right now seem not to be there...but fear missing the initial stages of their recovery, and also fear that there may not be one at all. Well said Chaz. And the same could be said for some Gorillas and not just the Kings you mention. I have been reading the discussions re valuation with great interest because I find myself as I suspect others do that I am in the unenviable financial position I am in as compared to 18 months ago because of a lack of attention to valuations both on a company basis and a market basis with regard to the overall macro economic picture. I have wrestled long and hard of what went wrong and what I did wrong. The following are my thoughts at the moment. 1. No investment strategy is an island onto itself especialy the GG. One cannot Just simply say I invest in only one type of a company or another. It must be coupled with a plan that is tailored to the individual's financial situation and social goals. Buffet can be the true value investor he is because of his circumstances(36 billion in the bank would make me a sloth too) and Mike Buckley can be the true GG that he is because of his circumstances but that does not mean that every investor can or should put themselves solely into one specifiec category or another. Their financial position and goals in life must come into play and their investing strategy adjusted accordingly. 2.Therefore I disagree that macro economics don't matter and they should not be paid attention too. It is easy for Buffet to say that, since most of his investments are in companies that are not effected by macro economic changes. I will still drink coke and shave with my gillete razor even if the economy is in a recession or not and I still have to insure my car whether it be Gieco or another company. But when the macro economic picture turns negative it was foolish of us to think that it would not effect the companies we invested in. It didn't matter how strong an advantage Cisco, INTC, QCOM had or has on their respective markets, if the economic background is such that their customers cannot or do not have to purchase their products or products utilizing what they have to sell, then they are going to suffer financially and we too as shareholders. I for one, as long as I am invested in GG stocks will pay very close attention to the macro economic picture. The biggest folly of my thoughts was the belief that storage was not a discretionary purchase but a required one even in an economic downturn. One only needs to look at NTAP and EMC to see how wrong that thought was. Buffet stocks have their own set of items that must be monitored such as when coke changed it's formula. It had nothing to do with economics or earnings but it had everything to do with customer acceptance. So just looking at the company's numbers is simply just not enough. 3. Valuations are relative to each individual market category. I do not believe we will find a single valuation method used in another market segment or by someone like Buffet, that we will some years down the road say that that one method served us well. It will be a combination of several methods including macro economics and social changes. Our companies earnings are too volitale. They can go from plus billions to zero or less in the matter of a few quaters and with the length of that delta being unkown. So how can you value such a company properly. It's value changes as the earnings for the nearterm future fluxuates between zero and billions. Whereas J&J and coke have more modest growth or no growth but steadier earnings. I like to compare products from these types of companies to cable tv. In all but the most severest economic situations one may find themselves in you will keep your cable service, you may cut back to just the basic package but you will keep it and find a way to keep paying for it. There is a concrete value to that but not so for alot of the products of our companies. Our company's sales are effected by economic and social circumstances and therefore are much harder to value. Was csco at bubble levels when profits were growing at 67%! I say no. Was it overvalued, yes, was it possible to keep growing at that rate most likely no, did anyone expect growth to evaporate completely, no. So how should we have valued CSCO? I dare anyone to find a method showing CSCO was only worth $14 when it was $82. Most of us thought csco was fairly valued from $40 on down. Show me a method that said csco was worth $40 or less when it was at $82, then we have something we can use as a starting point. 4. We are in rocket ships, lots of times they go to the moon but sometimes they blowup. The last 18 months was onetime they blew up. We need to see that faulty O ring prior to disaster. We need to monitor and keep a constant vigil on all indicators regardless of what they may be if it will effect the sale of our company's product. Let's not just listen to the technology or be blinded by it, the outside world has and will continue to effect that technology no matter how powerful or unique. I think we got the technology side of the equation licked it's the other half we need to figure out and we should be using any and all input available. Lets not forget that making the money is one thing but keeping it is what counts. 5. Saying what happened to me was because I was greedy is a cop out, that's too easy and at what percentage gain do you stop being greedy? What really happened is that I screwed up by not seeing the big picture and not doing number 6. 6. Last and not least. Always be prepared for the worst and be willing to live with it. So one should always be running "what if" calculations and scenarios. Then act accordingly so that one retains one's peace of mind regardless if the best or worst happens. 100@atleastthatswhatIthink