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

To: Jurgis Bekepuris who wrote (54509)	10/29/2003 4:29:53 PM
From: Stock Farmer	Read Replies (3) \| Respond to of 54805

Yes. The other thing about the '99 G&K index is that it was built with hindsight. Which is where G&K investing really shines. Instead of pegging the prices of a company when it was added to the index, the prices were quoted as of the beginning of the year. Take Qualcomm, which is priced into the G&K index at about $7 but wasn't seriously discussed on the thread until it had already doubled from there. The bulk of the evidence I have seen is that indeed Gorillas (as identified in hindsight) exhibit good return potential, but when one adds in the lack of performance from the false positives (using the only real investment tool: estimation), the end result is not significantly superior to alternatives to justify all the time and energy that goes into the taxonomy. If you take 2000 people and ask them to identify a stock that will perform better than the S&P, then 1000 of them will succeed (on average), some more than others. Ask these 1000 people to pick another stock that will perform better than average and 500 will be right. Repeat, until the numbers get too small. Odds are you'll have a handful of people who picked 5 stocks that beat the S&P by a lot and another 5 stocks that beat the S&P by a little bit. If there was a method that was better than randomly flipping a coin, then it should exhibit even better results. Here we have an entire thread of maybe 2000 bookmarks, and very few people claim to have used this method and picked even 5 stocks that have beat the S&P. Mike can mention two from his portfolio, but he forgets to mention the other four that didn't. And so on. Difficult to operate a scientific experiment in retrospect however, as selection bias is too prevalent.