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No. of Recommendations: 68
Just as 1987 and 1990 were survived by investors as the great technology companies continued to grow revenues and earnings through it all and into the future, so too will the correction of 2000 most likely be remembered. This time we just might have our first opportunity to see how the mature gorillas respond during the recovery over the next few months/quarters to test the oft quoted premise that 'gorillas bounce back first'. We did see it in 1998, but used in conjuction with this more severe correction we might get a more accurate fix on that premise. The 1987 correction was too early in the technology adoption life cycle to get an accurate read on so many mature gorillas.

Here's the chart:

Technology Stocks as measured by the PSE Technology Index

Recoveries following significant corrections (1983 - 1999)
Period	% Decline	Period	%  Recovery

10/83 to 7/84 -37 % 7/84 to 2/85 34 %
2/85 to 10/85 -27 % 10/85 to 4/86 65 %
4/86 to 9/86 -19 % 9/86 to 10/87 65 %
10/87 to 12/87 -43 % 12/87 to 7/88 36 %
7/88 to 11/88 -23 % 11/88 to 7/90 43 %
8/90 to 10/90 -35 % 10/90 to 1/92 107 %
1/92 to 10/92 -24 % 10/92 to 3/94 67 %
3/94 to 4/94 -16 % 4/94 to 9/95 97 %
9/95 to 1/96 -15 % 1/96 to 5/96 28 %
5/96 to 7/96 -25 % 7/96 to 1/97 57 %
1/97 to 4/97 -15 % 4/97 to 10/97 51 %
10/97 to 12/97 -22 % 12/97 to 7/98 39 %
7/98 to 10/98 -30 % 10/98 to 12/99 267 %

We will be able to add to the above list the 2000 data once it is all completed. Look at the recovery after the 1990 (Gulf War) period as well as the 1992 recover and 1994 recover. Certainly, the recovery since the 1998 autumn has created a lot of wealth and the recovery percentage since 1998 shows that.

It will take time for the recovery to work itself out following this correction, but believe me - it will work out provided you are patient and give it time. It's certainly a good time to spend the weekend looking at valuations in a realistic manner and looking for possible stocks that appear to have valuations which might be poised to benefit investors once the recovery process gets under way.

It might be worthwhile for us as a group to take a look at some of the valuations of the gorillas and candidates within that context to see if a long term time horizon would indicate adding more shares of favorites seems appropriate at this point or if valuations have simply retraced to a more 'normal' point.

Taking a look at the P/S and YPEG ratios of gorillas like Qualcomm, Siebel, Intel, Cisco, Microsoft and Oracle would be a worthy place of starting. It's obvious they have all come down from some of the excess, but in comparison to what the market in more recent 'normal' times (pre November run) has awarded a gorilla like Microsoft or Cisco in terms of P/S ratio (16 - 18) we could see if we are above, below or equal to at least that time frame 'norm'.

Of course, we would need to have the current quarterly reports to be able to update these ratios to include the most recent trailing 12 months total revenues. Therefore, an accurate reading (outside of Oracle since they have already reported P/S = 18.64) using P/S at this moment wouldn't be a clear picture. Not that P/S is any great unit of measure, at least it is one we can use in combination with other metrics to view the bigger picture to see if we are in excess mode or more near the 'norm' mode in the gorillas. As stated, they have come down since a few months ago, but do they signal 'bargain'?

Qualcomm is at 18.1 and Microsoft is at a 17.17 using the previous four quarters. Siebel is at 21.3, Cisco is at 26.42 and Intel is at 13.36. Of course, these might change based on the upcoming quarterly reports, but the past quarter is not always the 'best' in terms of revenue growth for some of the companies due to seasonal flatness. However, as the quarterly reports come in over the next few quarters, the P/S is simply one gauge to compare and contrast. The growth ratio is another. Obviously a company like Siebel is at a higher growth rate than the more mature companies, hence the premium.

What about some of the royalty plays in terms of P/S?

Broadcom - P/S of 50.4
Network Appliance - 32.64
EMC - 17.21 (look at that Mike, the market is giving a gorilla P/S to our beloved EMC....)

I won't even get into candidates of gorilla games and royalty games that are experiencing 300 - 400+% y/y revenue growth. The premium paid for those types of young, high growth companies seems obvious to me and fits in the aggressive growth category of investing.

Once again, we need the most current quarter to update the ratios.

Regardless, investing is for the longer term and in a 'normal market' it does take time to accumlate wealth. It rarely happens in a matter of months, but takes years and years to allow time for the companies to increase revenues, execute and provide the kind of growth which will lead us to our goals. Hence, we continue to work, save and invest in hopes that the longer term is indeed in our favor (which it is).

It's always easy in retrospect to look back to even a week ago Friday when things looked less gloomy, or back a couple of months and question 'why didn't I see it coming?' or 'what could I have done better?'. We all continue to learn, but no need to be down and out about the process. Historically speaking, time is on our side and little has changed in terms of gorilla gaming simply because of the last 6 months spike and retracement. It's not possible to 'buy' time, so one has to be content to wait it out as an investor. If you are holding investments that have a cost basis much higher than current prices, it will take time to recover - no doubt about that. I've got plenty of losses from investments I made in the latter part of 1999 as well, but if I look back one year, two years, five years, ten years or more - I certainly have no reason to doubt the future will continue to reward as it has in the past. Yes, returns that were way up there have now come back to earth, but I have no fear that a few years from now all indications are 'go'.

However difficult the frustration seems at the moment, we have years of investing left in our lives to move forward. Through continued saving of a portion of one's income and routine investment in our well studied investments, goals will be reached if history is any indication. If not, well we'll rewrite history. <ggg>


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