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I have noticed a lot of conversation lately about how gorilla price gains are occuring earlier and earlier, making it an advantage to try to enter the market prior to when a gorilla game is obvious, thus the gorilla "candidate" term.

I have limited funds to invest in new stocks, and am trying to determine how to weigh what the best growth opportunity stock is. I am only 27, so I have some time to kill, and I am trying to get into some good gorillas or gorilla candidates before they meet Cisco's market cap.

I tried measuring these (3) criteria:
1. % down from this year's high (1 is highest)
2. size of market cap (1 is lowest)
3. % of growth already this year (1 is lowest)

My little theory is that is that figuring out these numbers can give me at least the short-term (1 year) best gain potential and the long-term (5-10 years) most room for overall growth.

Feel free to tell me what a horrible yardstick these tools are, or in how I am misapplying them.

Anyway, the results are as follows, using this list of companies....

BLDP (8)
RMBS (11)
ELON (16)
CREE (17)
LHSP (18)
(CRA)(19)biotech obviously, but thought I would throw it in.
CTXS (21)
GMST (23)
SCMR (23)
SEBL (25)
RBAK (26)
ITWO (26)
PMCS (30)
BRCD (33)
JNPR (39)

This did not take me very long, but if you think I just wasted my time and yours, and that I should have just rented a movie from Blockbuster...please tell me now.

I would love to be set straight on why this is a useful or nonsensical way of narrowing choices for investment.

Thanks,
Aridian
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Anyway, the results are as follows, using this list of companies....

BLDP (8)
RMBS (11)
ELON (16)
CREE (17)
LHSP (18)
(CRA)(19)biotech obviously, but thought I would throw it in.
CTXS (21)
GMST (23)
SCMR (23)
SEBL (25)
RBAK (26)
ITWO (26)
PMCS (30)
BRCD (33)
JNPR (39)


I don't understand the numbers -- can you please elaborate? Are the companies with low numbers supposed to be better than the ones with high numbers or vice-versa? Thanks.

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No. of Recommendations: 1
SlyAce,
Sorry for the confusion, but it would have taken me too long to reinput all the data, since it was done on a pad of paper.

The ratings are based on these (flawed?) propositions:

1. The farther off the high for this year represents the best short-term entry point.

2. The smallest market cap indicates more room for rapid stock price growth.

3. The smallest amount of growth this year indicates that stock has not "exploded" this year yet.

For each of these three criteria, the number 1 was assigned as the "best" in that particular category.

The resulting list shows the combined totals for the three criteria.

All info from Quicken.com

BLDP
36% off yearly high
market cap - 7 billion
Stock price up 650% from low this year (22 to 144)

RMBS
32% off high
7 bill cap
920% (51 to 471)

ELON
29% off high
2.7 bill cap
2200% (5 to 113)

CREE
24% off high
5 bill cap
1350% (15 to 202)

yada yada
I am too busy for the rest, but it ends with JNPR

JNPR
Currently at high
Cap - 47 bill
Price up 2700% (11 to 301)

If anyone wants, I can fill in the rest later.
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No. of Recommendations: 3
Aridian wrote:

The ratings are based on these (flawed?) propositions:

1. The farther off the high for this year represents the best short-term entry point.

2. The smallest market cap indicates more room for rapid stock price growth.

3. The smallest amount of growth this year indicates that stock has not "exploded" this year yet.


I liked your list enough to print it and I hold all but five, and four of the five are the last four, so maybe I have been using your methodology without knowing it.

A few thoughts. First, the most important thing is the list itself. If one were to invest equally in all 15 companies, in 5 years, one would probably be one happy camper. Second, I also have looked at market cap when deciding which companies on the Silicon Investor lists had the most upside potential. Obviously, this factor alone is not dispositive, but it is something I consider. Third, I was surprised that RMBS and CREE scored so well given how much they have already run this year. Fourth, I suck at market timing so don't listen to me. As soon as I decide I like something, I buy it (if I have the funds). I have been reading stuff by the IBD guy lately (O'Neil) in an effort to learn to time the market, but I am not all that happy with the 25 or so sell rules and the fact that taxes seem to be ignored. Besides, once I decide to buy something, I don't feel like waiting for 4 to 15 weeks for a cup and handle to form. Nevertheless, I would be a much happier camper today if I sold CRA at 275 and RMBS at 450. If they go back up, I probably won't care. In short, if your methodology turns out to work, I will follow it with enthusiasm. Fifth, even after seeing how your methodology ranked the 15 companies, I am not all that confident that BLDP is a better short term play than is JNPR. If anything, BLDP to me seems like a pretty long term play (along with ELON, LHSP, CRA, and GMST). In fact, if somebody put a gun to my head and made me pick only 5 of the 15 to hold for 5 years, I am not sure I could do it, but here goes and why (in no particular order):

1. CREE -- I like the management, know about the businesses, and believe the company will do well even without blue lasers, so I get some performance over the next 5 years and some upside potential at the same time. I am not sure where this fits into the gorilla game, by the way.

2. SEBL -- again, I like the management. Also, this is the gorilla in CRM (I need one true gorilla in my "gun to the head" portfolio).

3. GMST -- here is my speculative play. VCR Plus and TV Guide are already out there making money, and there is huge upside potential if this become the Yahoo of interactive television. Maybe a gorilla some day?

4. SCMR -- even though a royalty play, I have to believe that this royalty game will be going strong in 5 years. For reasons I cannot articulate (probably a bad sign), I would pick this one over RBAK and if I were limited to five, I would not pick two in the same game.

5. ELON -- also speculative since there is no tornado as of yet, but if Moore says it is a gorilla, that works for me. I can see all of my appliances talking to one another in five years.


Why did I eliminate CTXS, ITWO, PMCS, BRCD, and JNPR? I don't own them and to include them on my list would make me pretty stupid now, wouldn't it? My methodology reminds me of Bill Murray as the movie critic on SNL's Weekend Update when he makes his Oscar predictions by process of elimination and he has not seen half of the movies. As to the other five I eliminated, I guess I don't like them as much as the five listed above.


Bottom line: you have a good list so go ahead and pick the ones you like.

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No. of Recommendations: 1
...Fourth, I suck at market timing so don't listen to me. As soon as I decide I like something, I buy it (if I have the funds)...

You are violating my patented process. My attorney's will be serving you with papers, if they can find you.

Maria
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No. of Recommendations: 5
SlyAce,

There are some obvious problems with investing by the little "system" I devised.

1. Market cap means nothing unless a relative standard can be made between the company being measured and the market it has available to it. This means that the company X that makes the small pads of paper for Marriot hotels may very well be the gorilla of Marriot hotel pads of paper, but does that market compare to wireless infrastructure, etc... of course not, so in and of itself, the cap is meaningless.

However, it is undeniable that psychology plays a role in investing, and the uninformed investor can easily look at Intel and Rambus and say "Intel can not keep doubling at that size! But if Rambus only got 1/4 as big as Intel, that would still be a great profit!"

I also noticed, oddly I thought, before the biotechs all crashed, that HGSI, CRA, MLNM, INCY and a few others (which, as I understand it, are profitless, and all prices were based on future genomic potential) all seemed to be right around $10 billion in market cap.

Almost as if investors in the market were constantly comparing the companies, and adjusting the buying so that the caps were all consistent. This is bull market psychology to me...assuming everything must go up, and then looking to see who has the most room to move yet.

2. The short term gains expected from a stock being off of its high for the year is also just a bit of psychology. I have been investing less than a year now, and I am constantly learning new concepts (and throwing some old ones out), and I am intelligent enough, about myself, to realize that I watch these stocks WAY too much. So by looking for a good short term boost, which would give me much needed confidence that I have made the right decision, I would be able to put up with dips in price much easier down the road.

Intellectually, I can understand the benefits of LTBH, but that insight is filtering in slowly unfortunately, as long-term ideas are obviously not realized in the short-term by newbies like myself. It is just tough to watch your savings fluctuate, and to have no experience in bearish market conditions at the same time.

I still have my CRA as well.
I am still waiting for RBAK to take back her high.
I am still waiting for ELON to prove it is not done for the year.

So the struggle goes on, and I expect a nice payoff in a few years, where I can then pat myself on the back and say "man, you REALLY are a LTBH visionary!"

I admit to selling scared a few times...you live and you learn I guess.

3. Amount stock has appreciated in last 12 months.
This one is also a wacko piece of psychology, because it assumes that all gorillas or possible future gorillas must eventually reach XXXX% in a given time span, as far as stock price growth goes.

I really did this to prove to myself something about RMBS, and that was that, if RMBS is indeed a gorilla (and I admittedly need more DD before I can say I came to that conclusion myself) and since it does have a relatively small market cap, that it still has not seen all the gains it will reach this year.

Out of those 15 companies, RMBS is 4th in overall growth in stock price the last 12 months!

Yet, if you watch CNBC, or listen to JOE INVESTOR or any market pundit....he will quickly tell you how RMBS has moved too quickly, and that they can NOT possibly keep it up.

Hmmm.

Where are all of these genius' opinions on BRCD, ITWO, and JNPR? Sure, some analysts may have mentioned their prices were too high, but most average investors, it seems, do not know of these stocks...at least compared to Rambus.

Why is that?
Cool name.
Association with Intel.

I clicked on the industry link on silicon investor one day, when looking at PMCS, and to my utter astonishment, the ENTIRE semiconductor industry was up an obscene amount the past 12 months.

I had not heard of 99% of the companies, the majority of which had gains over 500% or more!

-----------------------

What does all this mean?

That I need to become technology educated.
That I can not own every great company out there, so I better just plan on choosing a few great ones for now.
That market timing, and market psychology are best left at the curb, and I should drive away fast.

That I really need my GG book to come in the mail already, so that some of the conversations on this board can start making more sense, and that I will stop making pointless comparisons, as I did with my little comparison formula.

I wanted GGers to rip that apart, to further motivate me to be able to add substantive posts to this board in the future, and so that I can actually give educated reasons as to why I have a particular company in my portfolio.

Ok, thats it from me.
Back to lurking until I have some semblance of GG knowledge to apply.

In the meantime, can anyone tell me if I should pull out my investments, until I have more intelligent reasons for owning the following companies I currently have?

ELON
RBAK
LHSP
CRA

Only ELON was picked due to reading these boards.


I fly home Thursday, hopefully my copy of GG is waiting for me.

Aridian
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Aridian wrote

There are some obvious problems with investing by the little "system" I devised.

Even so, I liked the system as well as your current post and I hope you did not think I was poking fun. Actually, I was poking fun at both of us because I think a lot of the same things. For example, LTBH is a lot more fun when everything is going up.


Where are all of these genius' opinions on BRCD, ITWO, and JNPR? Sure, some analysts may have mentioned their prices were too high, but most average investors, it seems, do not know of these stocks...at least compared to Rambus.

I have been following BRCD since last summer when it was being given away relative to today's prices and there is no good reason I can think of that I don't own it. Each time I think of buying, I look at the chart and remind myself of what an idiot I was for not buying it the last time, tell myself that a dip has to happen at some point, and then go on to buy something else, only to repeat the entire process again later.


Enjoy the book -- it changed my life, literally.
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Sly Ace:

4. SCMR -- even though a royalty play, I have to believe that this royalty game
will be going strong in 5 years. For reasons I cannot articulate (probably a bad
sign), I would pick this one over RBAK and if I were limited to five, I would not
pick two in the same game.


Sly,
Could you explain why you believe that Sycamore and Redback are in the "same game"? I'm not saying that they aren't, but I just spent an hour on their website
and the only thing I could come up with is:

http://www.sycamorenetworks.com/solutions/products/silvx_onms/overview.html

Is it your contention that this product competes with Redbacks SMS:

www.redback.com/products/sms_1800.html

or with their Siara product:

http://www.redherring.com/insider/1999/0901/news-siara.html

As for Royalty, many are betting that Redback has a more simian nature.

Thanks, Tim

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Could you explain why you believe that Sycamore and Redback are in the "same game"? I'm not saying that they aren't, but I just spent an hour on their website

Sorry about that. "Same game" defined loosely as "next generation networks" including companies such as BRCM, COVD, CSCO, CMTN, etc. Defined broadly, SCMR and RBAK are much more similar to one another than to SEBL, CREE, ELON, etc.
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