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

To: Mathemagician who wrote (54533)	10/31/2003 6:51:58 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Hi Mathmagician, You wrote: the Gorilla Game does not seek to identify the gorilla before it becomes one. Exactly. This is the only time that the market is likely to price the Gorilla below "fair value" for a long-term position. Once the Gorilla becomes identifiable as such, market theory suggests that it should attract an appropriate price premium. You wrote: [The Gorilla Game] is all about finding a market that is both likely to produce a gorilla then investing in a basket of all the candidates, weeding them out one by one until the eventual winner(s) emerge. This is, indeed, possible prospectively. Not at all forgotten. Whether such a strategy is possible, prospectively, is unquestionable. Whether such a strategy delivers returns that are other than mediocre is another question altogether. Back a few years ago when I had more time I posted an essay to this thread with the thesis that we should expect AVERAGE returns from the Gorilla Game, at best, and as practiced on this thread one should expect to be gamed to maximum extent. Buying a company without reference to price and only with reference to business characteristics is very dangerous. A company can grow revenue by 10x, but if price anticipated 11x growth then one can end up sitting on a losing investment. I do believe however that a Gorilla with revenues of X is likely to be far more valuable than a comparable chimp with the same revenues. So if we are comparing across top lines on a PSR basis, then Gorillas should attract a premium. If however we are comparing across bottom lines, or on a DCF basis, well that's a different story.