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

To: Bruce Brown who wrote (50193)	2/5/2002 9:48:22 AM
From: Mike Buckley	Respond to of 54805

Bruce, I don't follow most of the companies Landis mentioned, so I don't have an opinion about that part of the interview. But I really liked the stuff about his general approach to investing. I especially liked his comment quoted below because it speaks to the issues of CAP and GAP and what I believe to be the wrong assumption that Gorillas are always undervalued. "But I think we're going to draw some lessons from the last couple of years. I think that what a lot of us missed this time was that the end demand was overestimated. If you asked Cisco for documentation on their forecast, they could tell you that a lot of their customers wanted to buy a lot. But you had to go still one level further and ask if all these telecom companies could really sustain that level of spending. It turned out the answer was no, and that's the observation that's blindingly clear in hindsight -- but most of us missed it in 2000." --Mike Buckley

To: Bruce Brown who wrote (50193)	2/5/2002 9:51:06 AM
From: techreports	Respond to of 54805

What did you think of his interview? I know you were not talking to me, but i'll give it a shot. They will participate disproportionately with an economic recovery, and they're basically no more expensive than they were in August when fundamentals looked a lot weaker. Whether you're looking at overall macro numbers or whether you're looking at tech stocks on a case-by-case basis, the inputs we're getting are starting to argue a little more convincingly that we're in the early stages of a recovery. Just because the outlook is a little better doesn't mean tech stocks are cheap or even reasonable. I like his strategy of figuring out what the big trends will be and investing in those areas, although investing in a trend that walstreet loves and is pumping is not the best way to create value IMO. They're still the microprocessor king. I think the open issue for Intel is their continued limited success in the market for communications chips. My suspicion is that there's a little bit of tension between Intel and Cisco. I think the folks at Cisco have done their homework, and they don't want a single dominant chip supplier. They'd rather have a handful of key suppliers that they can pit against one another. I'm surprised he didn't say anything about Itanium. My economic outlook is a lot like my weather forecast -- I recognize that the experts know a lot more than I do and they still manage to get it wrong pretty often. We're thinking that the economy could be recovering right now, and by the end of the year the pressure will be on for people to get their technology exposure back up. So, we could have a pretty good year. I bet this guy was bullish last year too? So that argues well for the optical-networking companies, whether you're talking about Corning (GLW:NYSE - news - commentary - research - analysis), Ciena (CIEN:Nasdaq - news - commentary - research - analysis) or Applied Micro Circuits (AMCC:Nasdaq - news - commentary - research - analysis). That group will eventually come back, but they will probably be next year's success story. In terms of this year, we're big fans of wireless, and we think the metrics could turn around quickly here on the cell-phone market, particularly in the U.S. I've been thinking about Corning. I think they are in the worst spot out of everyone. There is a ton of dark fiber. Start-up telecom carriers are dropping like flies, which floods the market with cheap fiber and I doubt we're going to see massive fiber build outs. Although, Corning should see demand over-seas in other countries that will be building out their fiber netorks over the next five years. Still, if you just read the press releases of any telecom carrier, all they talk about is CapEx cuts. They plan to cut CapEx even more in 2002, so I wouldn't expect this market to rebound anytime soon. That said, Corning is at least some what attractive from a price-to-sales point of view. JDSU trades at over 5 or 6 PSR "But I think we're going to draw some lessons from the last couple of years. I think that what a lot of us missed this time was that the end demand was overestimated. If you asked Cisco for documentation on their forecast, they could tell you that a lot of their customers wanted to buy a lot. But you had to go still one level further and ask if all these telecom companies could really sustain that level of spending. It turned out the answer was no, and that's the observation that's blindingly clear in hindsight -- but most of us missed it in 2000." Ya, i liked that too, Mike. You could apply this to everything. Will internet companies survive? Do banner ads provide enough value to create a business model? Can carriers continue to spend 25% of sales on CapEx (when the historical average is like 15%). No one asked questions at Enron, because the stock went up. Like that meant everything must be ok?