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Investing Books / Gorilla Game, The
|Subject: Re: how many is too many?||Date: 2/14/2000 6:57 AM|
|Author: BruceBrown||Number: 872 of 8767|
There have been many books, articles and thoughts written on the subject of diversification and what a portfolio of an investor should look like on an 'ideal' basis. There is a lot of information here at the Fool to read as well. There are also a lot of opportunities for gorilla game investors to invest in at the moment. We cannot invest in them all, but below you will see the types of returns one could have had by at least holding a few. Allow me to write my own book below. ;-)
It's hard for me to answer the question since my holdings could qualify as a mutual fund as well. If you play the basket approach in certain areas by getting in early in what appears to be a gorilla game, depending on the time frame involved, performance may not suffer that much provided you have the right choices and you consolidate into the eventual winner. This is not the only option as one can also take an approach of only selecting the single most likely candidate early on, or soon after one candidate takes the early market share lead.
The market is rewarding these candidates earlier on these days than previous years of gorilla gaming. Geoff Moore spoke of this recently on the Gorilla Game listserv digest and said that the model has moved from P/E to P/S and now to P/V (price/vision ratio). Let me share that post with this message thread as well:
From: "Geoffrey Moore"
What capital markets have become better and better at is pricing in market development models that predict outcomes earlier and earlier in the Technology Adoption Life Cycle. Think of election night. It used to be you counted all the votes and said who was the winner. Then it was that you counted some of the votes and projected the winner. Then it was that you sampled a key demographic subset and you projected the winner. Now it is you interview a key subset on exiting the polls and declare the winner. The system gets better and better at projecting outcomes earlier and earlier.
Same in the stock market. P/E is an after-the-fact measure. P/S ratios are a market share measure that "assumes" that P/E will follow. Now we have "P/V" (Price/Vision) ratios that assume that P/S will follow and P/E after that. The risk, of course, is that the model is wrong. But if the model is right, then getting in earlier makes sense. That is where the market is headed. It is what we all did with Qualcomm last year, and JDSU --- used our models to act earlier than other investors.
Now, the model could be wrong, of course. But I would argue the correct response then is to change the model, not to bet later.
Chairman, The Chasm Group
Venture Partner, Mohr Davidow Ventures
Let me make the disclaimer on behalf of Mike Buckley (before he has the chance to comment), that Geoff did not capitulate into seeing Qualcomm as a gorilla until end of summer/early fall 1999. He saw it as a possible Prince in a royalty game before changing his mind. Mike and some rather astute investing colleagues called it much earlier (end of March, 1999). Not to mention, Mike finally caved in and capitulated on this past Friday to using the word gorilla for Siebel Systems where Geoff, Silicon Valley and many others were using the term in the middle of 1999. However, Mike was already well invested in Siebel via the gorilla game basket approach in the front office game over the past few years and had his concrete reasons for not crowning it earlier. I became acquainted with Mike on the Siebel message board here at the Fool and respect his strategies, thoughts and vision.
Mike holds around 6 stocks. I hold well over 20 (mixed between portfolios of my wife, myself and my two children) which is the fodder for an endless stream of comments pointed in my 'mutual fund' direction. ;-)
Yet, that doesn't limit both of our strategies of being gorilla game investors or success. Back to Ruben's question. Mike and I would both argue that comfort is an important part of investing. If one feels comfortable holding 5 holdings or if one feels comfortable holding 20 - who's to say that the level of comfort one has in those two approaches isn't more important than comparing the returns? A lot of things are factored into both strategies. I play a few baskets, am more aggressive and invest in things outside of gorilla games as well. If I consolidated my holdings to ten holdings or less, I wouldn't feel 'comfortable' playing my stratgegy of investing in godzillas, B2B stocks, gorillas, potential gorillas and some non technology growth stocks because I couldn't 'cover' the space that I need to cover in a 'comfortable' manner with so few stocks. In that respect, I will sacrifice a little performance for the sake of meeting my comfort zone requirements.
However, even using my 'comfort zone' approach, I would hasten to say that this decade - let alone the past 5 years - hasn't been much of a sacrifice at all. I'm certainly not expecting that to continue forever with all of my holdings, but there will always be opportunities for gorilla game investors going forward to at least have a couple of huge winners.
Now, if we take Geoff's comments from above and think about how the market has been reacting to early on candidates, we can see what has happened to at least some of the favorite gorilla game discussion stocks that are subjects on this board and others. Let's take a look at some 20 month returns since this board started in April/May of 1998. It's not an all inclusive list by any means, but includes 31 stocks that have been discussed by gorilla gamers and godzilla gamers and shows what the returns for that short period of time has been for each investment.
Here it is from top peformer over the 20 month period to the bottom:
CREE - 2038%
Qualcomm - 1780%
Network Appliance - 1492%
ARMHY - 1342%
JDS Uniphase - 1191%
Sandisk - 979%
eBay - 921%
Real Networks - 851%
Broadcom - 816%
DoubleClick - 795%
Yahoo! - 770%
Sun Microsystems - 770%
Gemstar - 692%
Oracle - 629%
i2 - 585%
Siebel - 585%
Brocade - 536%
Citrix - 414%
EMC - 410%
Amazon - 358%
Juniper Networks - 335%
AOL - 329%
Cisco - 327%
Redback Netorks - 294%
Apple - 279% (since it was mentioned recently)
Intel - 187%
Microsoft - 84%
Wind River Systems - 74%
SAP - 65%
Rambus - 44%
Peoplesoft - (-50%)
Certainly a healthy looking bunch of returns for the 20 month period that this board has been available for Fools to chat about gorilla game investing. I'm not sure what it says about the question of how many candidates to hold, but holding at least a few of the top performers over the past 20 months should put some smiles on all of our faces. It says nothing about going forward, but if you compare this list to other investments outside of technology you begin to feel the impact. Some of the stocks above were not available for the entire 20 mon