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Investing Books / Gorilla Game, The


Subject:  Re: My port. categories Date:  1/7/2000  9:46 PM
Author:  TinkerShaw Number:  400 of 8788


The other thing to keep in mind is that Gorilla, King, Prince is only a framework of thinking about technology stocks. For example DELL is only a Prince. A prince that has out appreciated every King on the planet.

The key is to understand the underlying market fundamentals that the terms describe and what these mean for your stock buying.

For example:

(1) Their will only be 1 Gorilla in each market. Consolidate behind it.

(2) Buy your enabling technology Gorillas no earlier than the beginning of the Tornado. Before this time it is not clear if the Gorilla-candidate will ever break out of its niche markets and enter mainstream and enabling technologies die in the bowling alley; on the other hand buy your application Gorillas during the bowling alley because application Gorillas can thrive in a niche even if it never makes a full blown Tornado.

(3) Sell your Gorillas only when a discontinuous technology which replaces the Gorilla's technology gains market acceptance.

(4) Hold your Kings lightly and sell them once hyper-growth begins to end. At the end of hyper-growth value will tend toward the mean (whereas in Gorilla markets value tends toward the extreme).

These are numerous mantras to the Gorilla game but they all have a basis in the underlying market structure of technology markets. If you can categorize your companies properly you can determine systematically when good buy times are, when you should hold a stock on a down swing, and when you should dump a stock ASAP. It takes the guess work out of buying and managing a portfolio and gives you the systematic tools needed to beat the market for years and years.

The rules are not some talisman. Get to understand the underlying rationale for the categories and rules. As you understand these things your sophistication will grow and you'll get a better understanding of which companies are worth owning and when to buy and sell these companies.

And of course it gives you a good idea of when to bend the rules to new realities in the market and new business formats.

For example, ELON is a hot company now. I may be wrong, but with a Gorilla analysis all I can see is an open, non-proprietary standard. How will ELON make money in this market? It is a good question we've debated extensively on the ELON board. Also, my contention is that the technology hasn't even crossed the chasm yet. Thus too early to buy into this enabling technology. As more information comes in I'll make that call. This same sort of analysis kept me out of RMBS and into QCOM in 1999. RMBS has subsequently (IMHO) taken a step forward in the bowling alley) and thus it is not until Monday that I bought into the stock. Interpretations on these things vary but this is how I have used the tools of the Gorilla game to analyse these stocks I think it was not just luck that I chose Q over RMBS in 1999. It was systematic analysis. Analysis any of us can do when applying the framework.

Another excellent example is BRCM. Love the stock. It is in hyper-growth but I can't find the requisite Gorilla characteristics. I categorize it as a massive King at this time. I will hold it only so long as its market is in hyper-growth. I also know from industry knowledge that BRCM's technology is a lock for about a year given the product cycle and the high short-term switching costs of the product. If I see the pipeline slowing down I will dump. Happily ~:) the pipe line is bloated at this time.

On the other hand, Cisco, a Gorilla, is fit to hold through market slow downs and huge stock corrections. For reasons related to its Gorilla power. Reasons which you will discover in the manual and from your own observations.

Read the manual with things like this in mind. You'll never see the stock market in the same way again.

Good luck all!

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