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

To: Pirah Naman who wrote (48271)	10/24/2001 2:37:33 PM
From: Thomas Mercer-Hursh	Read Replies (1) \| Respond to of 54805

let's move the thread back to its roots. And Paul Phillip said: The valuation threads on this board in the past six months have become so pendantic as to be of no practical use to me Guessing that I am considered one of the "guilty" parties in these remarks, I would like to offer a thought or two. I think the recent volume of discussion on valuation in which I was a part was as extensive and non-conclusive as it was in part because I, a newcomer, was looking for empirical validation for proposed techniques while most of those using one valuation method or another appear to be content for their metric to provide input to a buy or sell decision at the time they are considering the transaction. To the extent that they are content with the theoretical background of the technique they have selected and with the decisions which they have made using it, they don't feel the need for the kind of validation which I would like to see, coming as I do from a background of science. I am inclined to agree that the discussion of whether to validate, how to validate, and what constitutes adequate valuation is not within the purpose of this thread and should thus go elsewhere or get dropped. I also suspect that it is largely pointless since those that are satisfied with what they have today are likely to remain so while those of us (assuming I am not alone!) who are not satisfied will only get resolution by someone undertaking the analysis which, should it occur, would then give us something concrete to discuss. However, a subplot in this discussion was the question of how any valuation method might apply differently or require adjustment when used with a gorilla. E.g., the current case in point, if valuation method X tells me that SEBL is overpriced today using the criteria I would use with "ordinary" companies, should I believe this, given that I consider SEBL to be a gorilla. If not, then how should I adjust the method or criteria to reflect SEBL's gorillaness. Those whose valuation method includes 5 year growth projections might well say that gorillaness is included because the sustained growth projected over that period is the kind of growth that only a gorilla can expect to attain. This seems to have a certain empirical validity, but is it enough? I must say that it certainly has the attraction of allowing us to model a slower near-term growth and more gorilla-like growth in the future, e.g., SEBL because of the economy or QCOM because that is when we expect its position to really kick in. Myself, I'm not going to be satisfied until I have done some more satisfactory testing (or someone does it for me, which unfortunately doesn't seem particularly likely), but I do think the question of how we should apply what we know or expect of a company because of its gorilla status to the problem of valuation is well within the charter of this forum.

To: Pirah Naman who wrote (48271)	10/24/2001 5:12:28 PM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

That paragraph could as easily have been written with TA and valuations reversed in place. There is sufficient record around SI that one could as well have been banging one's head regularly about a tech stock's TA, and that this head banging could have been avoided through getting out when valuations were too high. There is the tool, and there is the mechanic that uses the tool, and they are not the same. Yes, one could have been banging one's head for many reasons. Technical analysis does not predict what is going to happen, it only reflects what has happened. However, it does help illustrate the trends and until a trendline is broken - there is no need to bang one's head on the wall. It's no coincidence that the technical analysis follows the trend - or anticipated trend - in the fundamentals. We're in the middle of a nice little mini-trend within the technology sector (for the third time this year). Will it break specific downtrend lines and forecast out an improving earnings environment or will it just meet those trendlines as resistance and roll over? Interesting to watch and no need to bang one's head against the wall about it. Yet, at some point in the future - it will be an important step and plenty of market forces follow it like a hawk. TA also helps recognize trading ranges between support and resistance which can be a useful tool for shorter term swings for entry/exit positions for those trades. It worked on the way up and has worked on the way down. Then again, fundamentals were improving on the way up just as they have been unraveling on the way down as we went through the historical aberration. However, since my earlier vote didn't get recognized :-) I will vote again - let's move the thread back to its roots. You can chat until the cows come home about competitive advantage, gorilla value chains and what not. If you see a value in a technology company that has enough potential as an investment - eventually you have to make a decision to purchase the equity for your portfolio. Wouldn't it be nice to purchase that equity using a risk/reward scenario that has the highest chance of success - or at least a higher chance of success than at a time when the risk/reward scenario is not stacked in the favor of success? Hard to imagine such thought process is OT for the board, but I will yield. BB