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

To: Morgan Drake who wrote (1624)	5/1/1999 12:39:00 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

THIS MONTH IN THE FRONT OFFICE - Part 2 The Front Office GOrilla Game To cut to the chase: History Year Quarter S&P 500 20.24% 8.61% 3.79% Gorilla Game 18.05% 7.42% -10.92% Russell 2000 -6.52% 2.57% 8.85% Two months ago our game was up 41% and the S&P 500 was up only 15% in the "history" column. As you'll see above, in the two months since then we've given up more than half our profits while the S&P 500 has increased its profits 33%. Considering that all of our stocks are either small- or mid-cap stocks depending on your definition, it's not unimportant that the Russell 2000 is still in the negative category and continuing to lose signifcantly to our game. All our stocks joined the smal-cap correction that culminated in October, 1988. Since then, every weekly measurement in the "history" column shows our game outperforming the Russell 2000. The stock-by-stock details: & of Company Portfolio In at Now Change Clarify 37.4% $13.25 $23.50 77.36% Remedy 21.1% $17.44 $17.50 0.34% Siebel Systems 35.2% $23.00 $38.44 67.12% Vantive 6.1% $27.63 $8.00 -71.04% As a reminder, the Front Office Gorilla Game was started with $10,000 (all fictitious) on Memorial Day weekend of 1998. Commissions are based on $8 per trade. Because the cash position is inconsequential, there is no accounting for interest. The summary: Stocks $11,774.25 Cash $30.27 Total $11,804.52 Restructuring the Portfolio I've given thought to removing Clarify and Vantive from the portfolio because it seems that they have little chance of becoming a gorilla. However, I have decided for the moment that they do, indeed, have a very small chance of becoming a gorilla. If Siebel Systems ever has the kind of problem that the other leading front office companies have had in the past, and if Clarify or Vantive power forward at the same time, each of those two stocks would have a shot at becoming the gorilla. I will grant that the possibility is remote, but for the time being I'm not willing to rule it out entirely. In that context, it's clear that Clarify and Vantive are both chimps. The book's investing rule about chimps is to hold them lightly. The above data shows that Clarify is currently the largest position in the portfolio. Obviously, to comply with the rules of the game, an adjustment is needed. I will sell two-thirds of the Clarify stock. Cash funds will be divided equally among Remedy and Siebel Systems, the most likely gorillas of the help desk software and front office software suites, respectively. The new alignment resulting from the changes puts Siebel Systems at about half of the portfolio. Considering that the company has had the most powerful and consistent growth of all our gorilla game players, that makes sense. Though Remedy's stock has been an underperformer in the 11 months we've owned it and the company has had its share of fundamental problems, Remedy continues to be the far-and-away most successful internal help desk software provider. I'm comfortable that the new allocation increases the exposure of that stock to one-third of the portfolio. Clarify, in its current role of chimp, is reduced to only 12% of the portfolio. Vantive, which has had by far the most problems of all our gorilla gamers, remains unaffected at half the exposure of Clarify, the more successful chimp. The details of the new allocations are as follows: % of Company Portfolio Clarify 12.4% Remedy 33.6% Siebel Systems 48.0% Vantive 6.1% Having burned $24 in commissions and disbursed our cash to remain as fully invested as possible, the new totals are: Stocks $11,764.81 Cash $15.61 Total $11,780.42 Ain't it fun playing a gorilla game with not-real money?!!!!!! Disclosure: I own Siebel stock, have owned other of these front office stocks from time to time, and will consider positions in any of them. --Mike Buckley