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

To: Stock Farmer who wrote (48849)	11/13/2001 9:18:28 PM
From: Thomas Mercer-Hursh	Respond to of 54805

Sure, if Qualcomm grows by 25% per year from now for the next 15 years 15 years is an awfully long time for a tech company. Not beyond possible, but stretching the norm, even for a gorilla. But, at the same time 25% isn't a particularly spectacular growth rate, especially for a gorilla ... not as something that will be achieved consistently year after year, but as the envelope one uses for the analysis. For a software or IP company in particular, where there is very little capital investment required to build out for increased sales, growth rates up to the 100% range are far from uncommon -- not year after year, but for a while. E.g., ACTU had 17 consecutive quarters of over 100% YoY growth before this year's downturn impacted software spending, but they could easily go back there if spending picks up again. Throw a little of that 50%+ growth in to the earlier years and one doesn't need to look nearly so far out to reach the same figure that your 25% over 15 gives. Are the big guys like Cisco and Intel cyclicals? Then why the heck do people talk about PEG instead of RMS earnings and cycle period? Because they are clearly not cyclicals in the classic sense. They may have some cyclical type properties and it might well be useful to incorporate this into our models, but that doesn't mean they follow models derived for classic cyclicals. Intel is probably a lot closer than Cisco, but it is not something that will fit simply in either case.