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No. of Recommendations: 33
I started off planning to find about 10-12 really solid companies with good growth prospects but pretty soon the list began to grow longer and longer and I began finding it very hard to decide which ones to eliminate. So finally I've begun to classify these companies based on their risk/return potential which I use to build a portfolio that balances stable stocks with some higher growth stocks.

The following is in increasing order of risk/reward. What it provides is a framework within which to compare companies of similar risk/reward potential. So, formerly, while I was asking "Should I buy Oracle or Siebel?" or "Should I buy Nokia or JDSU?", I now compare investments within the same risk/reward class.

1) Giants - (Companies > 150-200B market cap)

1a) Lower Growth rates
Companies which dominate an industry that is more mature, although it has many good years of growth left. Can leverage their dominant position in this industry to enter and dominate new growth industries.
Choices= Intel, Cisco
Others = Microsoft, Oracle, Sun

1b) Higher Growth rates
Companies which are likely to dominate an industry that is earlier in its growth curve than the industries from 1a.
Choices = Nokia, EMC
Others = Ericsson

2) To be Giants - (Companies between 15B - 150B market cap)
Companies which are showing clear signs of becoming Giants. They are clear winners in huge growth industries and have a proven track record. Although B2B and optical networking companies have huge potential, there isn't a clear winner yet and there is less of a track record. IMHO, a NTAP or a BRCM offers better risk/reward than a ARBA or a SCMR.

2a) Bigger
Choices = JDSU, Broadcom
Others = Yahoo, Qualcomm

2b) Smaller (=> Larger reward potential?)
Choices = Network Appliance, Gemstar
Others = Siebel, I2, Redback

3) To Be 'Giants To Be'(!) - (Companies under 15B market cap)
Companies which look like becoming leaders in industries which could explode but are still in their infancy. Hopefully these are enabling technologies at the bottom of an immense value chain. This value chain has innumerable possible applications, many of which can only be guessed at right now. The more proof that the industry will, in fact, materialise, the better.

3a) Industry to materialise in near-term
Early applications of this technology are already being accepted and widespread commercial acceptance is likely in the near-term.
Choices = Echelon, CREE

3b) Mass-market acceptance is a little further out
More uncertainties about when and if this technology will be accepted.
Choices = LHSP, Ballard Power, Celera

Everyone has their own tolerance for risk/reward. I've decided to buy about 2 stocks from each category (ie. 1a, 1b, 2a, 2b, 3a) as my core portfolio and about 4-5 stocks from 3b as my "speculative" portfolio.

It is valuable to understand whether a particular company is a Gorilla or a Godzilla or a King but a Gorilla may not always make a better investment than a King or a Prince. Many people consider Oracle a gorilla while Nokia is a prince. Does that mean a GG investor should buy Oracle instead of Nokia? Oracle is a gorilla in the more mature database business but it is only a chimp in its most exciting growth area of E-business applications like CRM, B2B e-commerce, ERP and so on.

Therefore some of these companies are not "pure" Gorillas. But no matter how you look at them, they are heavyweights who dominate their industry and have a clearly defensible competitive advantage whether it be brand or an open proprietary architecture with high switching costs.

Besides, this classification isn't as clear-cut as it seems. Should Cisco be in 1a or 1b? Should Gemstar be in 3a because it's industry hasn't yet taken off although it is on the verge of doing so. I'm not trying to make a list of best stocks here. These are simply some stocks that I know and happen to like.

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