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

To: DaYooper who wrote (54565)	11/2/2003 11:20:53 AM
From: Uncle Frank	Respond to of 54805

WE'VE MOVED! Please check the thread header for directions to the new location of the Gorilla and King Portfolio candidates forum. uf

To: DaYooper who wrote (54565)	11/2/2003 3:12:39 PM
From: Jurgis Bekepuris	Respond to of 54805

>I believe that Cisco, Intel, and QUALCOMM will >substantially outperform the stock market as a whole over > the next ten years. As much as I would like to contradict this claim, I realize that I don't have a clue about "stock market's" performance in the next ten years and the companies mentioned have all fallen from my circle of investment: Intel and Cisco due to non-stop advocacy against expensing of stock options, which I believe is management's insult to their shareholders. Qualcomm due to have never demonstrated above 15% ROE. I glanced briefly at my CSCO estimation and with projected 4% annual return for the next ten years, I am not interested in buying it and would sell it if I held it regardless of option issues. There are speculative scenarios that would make the return much higher, but I would not bet on them. Therefore, let people evaluate your statement for themselves. If they subscribe to it, they can follow you in buying the companies you believe in. Jurgis

To: DaYooper who wrote (54565)	11/2/2003 6:57:37 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Hmmm... "buy low, sell high..." sounds kind of trite if you put it that way. More complex than that. "Buy good companies when they go on sale, sell them when you can get more than they're worth" would be more the way I like to think about it. But with more depth than that. Otherwise I might be buying and selling on a frequent basis. I'm a patient guy. My entire portfolio consists of long positions, although the vast majority (by value) of current positions were entered in the summers of 00 and 03. Anyhow, outside of a bubble, a stock price will move up and down within a range of the company's long term perceived value. Your strategy is to work that range. Not quite. My strategy is to adopt long positions that are appropriate to market conditions as I expect them to pan out over the next few years. For example, I was about 95% long in go-go-boom-boom tech up until July '00. Then I shifted into a defensive bunker of high-yield capital preservation anchored by some of the most antedeluvian of the old economy, which was quite cheap at the time. In '01 and the first half of '02 I accumulated the cash this beast threw off and began building a small private equity portfolio of carefully chosen early stage startup companies. In June/July of '03 I repositioned from my bunker into good companies that had been horribly mauled, and I've been adding to my startup portfolio as well. One major decision every 3 years hardly sounds like "active" to me. Although I am very very active in researching opportunities and watching macro trends. This is not "gorilla gaming". It's adoption of strategies calculated to take optimum advantage of macro conditions as I expect them to be, without exposing myself to too much risk that my read of the winds and currents of the financial ocean are off base. When racing a yacht, nothing better than the spinnaker for a downwind leg. But leaving it up the whole race? Nobody with any competence would even suggest it. So why would we sail the financial markets any differently? There are times to hold the tiller firm and other times to jibe aggressively. There are even times to reef in all the sails and drop anchor. But here is where I think we disagree. I believe that Cisco, Intel, and QUALCOMM will substantially outperform the stock market as a whole over the next ten years. I own these stocks today and will still own them in ten years. I will not need to think about technical analysis, valuations, or sharp price movements. I'm not sure if today's prices on these companys' stocks are high or low in that earlier mentioned range. But I don't need to figure that out because over the long run their competitive advantages will allow them to outpace the market, imho. This is a very interesting statement. It pre-supposes that the market under-values these companies and has not already factored their long-term performance potential into the current price. Take a look at QCOM. It is earning a dividend measured in pennies and yet it attracts a price of almost $50 a share. There's a lot of business growth built into such a price. If we don't take the time to figure out HOW MUCH growth is built into that price, and then convince ourselves through some rational process that the company can achieve MORE THAN that growth, then we are (perhaps unconsciously) merely gambling. Me, I have run the numbers and determined that the risk of them not delivering this growth is high enough that it outweighs the potential reward if they do. It's called "risk weighted" return. Not just absolute return. There is an entire industry at work whose sole job is to convince retail investors that company XYZ can achieve more growth than the institutional investors that hold XYZ believe possible. If we are buying shares then someone is selling them, and odds are that the seller is either an insider or an institution taking money off the table. Ours. So it behooves us to think carefully. The good news is that institutions can't read the tea leaves any more accurately than we can, so the future is indeed up for grabs. The bad news is that past a certain point, we are unlikely to see big big big returns over the next decade from the companies that made the big big big returns over the last decade. Odds are against it. As a side note, if I knew of a different investment vehicle such as bonds, art, gems, or precious metals that I believed would provide a greater ROI over the next ten years I would move my investments there. Have you contemplated private equity?

To: DaYooper who wrote (54565)	11/3/2003 11:26:36 AM
From: Bridge Player	Read Replies (1) \| Respond to of 54805

<< I believe that Cisco, Intel, and QUALCOMM will substantially outperform the stock market as a whole over the next ten years. I own these stocks today and will still own them in ten years.>> Let's try a little Socratic method <g>. Are there instances in the past in which companies with the same investment patina of these fine companies began to lose their competitive edge and eventually fell from grace? (and fell far in price) Were any of these companies what would have been called gorillas by today's standards? Could the chances in fortune that befell them have been anticipated in time? Are there potential changes in fortune that might befall the companies you mention? Would those changes be recognizable in sufficient time to exit the investment? Would one's psychological makeup make it possible to actually sell a company that had made one so much money over so many years? I am reminded of companies like RCA, Bethlehem Steel, the railroads, Digital Equipment. But then perhaps none of these were truly gorillas.