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TMFFuz wrote:

So, are there any tornadoes forming or are there industries in the tornado today??? And, more importantly is anyone actually following the game and buying a basket of stocks rather than trying to figure out the Gorilla???

I consider myself as using the basket method alongside my core holdings of established gorillas and kings. If you took a look at my portfolio, part of it resembles a large junior high football team that won't all fit on the bus to travel to every game. In fact, there aren't even enough uniforms to go around. That being said, we should discuss the pros and cons of using this strategy. The book does an excellent job of discussing it, but we should probably touch on some of the requirements. I had played a technology basket or two before The Gorilla Game was written.

I did this in the royalty game of the OEM PC box makers because I held shares of the core players (Intel and Microsoft) before I added the box makers. I put equal money on Dell, Gateway (the two for direct sales), HWP, Apple, Compaq, Micron, IBM when it was clear the Internet was going to need a lot of hardware to make it into a reality. This was certainly not a new game, but the Internet revitalized the box industry after Wall Street had nearly written it off as 'over'. I trimmed the 'basket' down to only Dell, Gateway and Apple as time went along. So my eventual basket ended up being PC: Gorillas Intel, Microsoft/Royalty plays Dell, Gateway and Chimp: Apple/Apple (software/hardware). From that experience, I actually had okay gains in my HWP, Micron, Compaq and IBM before moving that money elsewhere. I don't think of the money as being 'lost money' by not having it all in Dell or Gateway or Apple at the time because frankly - who knew in 1994/95 which business model would be the best. Obviously, the direct model proved to be the model that changed the industry.

Searching for an emerging technology is the first step. Study the predictions of the market for that emerging technology in terms of need and possible growth in some kind of dollar amount. Search for the leading candidates and any signs of a value chain. Try to determine where in the technology adoption life cycle that particular technology is in. Usually, by the time you do this, some leaders have already started to appear. Put on your long legged FUD boots because the muck is thick and the goo has a stench to it that requires special gear to head through the trenches. I latched onto i2 and Siebel in 1998 using this strategy and avoided placing any money on the other players in the CRM space or SCM space. However, had I been looking in 1996 or 1997 it would have been a different story as it was earlier in the game.

The entire field of IP/Broadband (Next Generation Networks) is my main area of focus at the moment. Paul Johnson, one of the book's authors, began a website in 1999 (http://www.nextgenerationnetworks.com) which we spoke about on a listserv Gorilla Game digest (directions to sign up are at http://www.gorillagame.com) and much discussion involved the technology adoption life cycle of the space and I dove in head first. It was hard to really get too much interest at the time because all the Godzillas were having a great run at the time. However, Johnson has written about this technology adoption life cycle over the past year and certainly has his clients and his focus on the space. Within that broader area, it breaks down into oodles of possible baskets to play for the various technologies. Fiber channel and especially fiber channel switching is just one of the current logical 'games' that I have chosen to follow. Once again, a leader is out of the gate in that field and my investment money went to the leader, although I am monitoring the entire field closely. There are games in the equipment needed for DSL, fiber, satellite, wireless, cable broadband and the storage and equipment (including hardware and software) needed to move the data to and from all of it. There are some early leaders in all of these categories and many on this board have chosen to invest in some of them. Many will end up being royalty games, but the growth wave carries everything up the beach during the tornado. Many of our confirmed gorillas and kings are smack in the middle of the games as well.

How to play all of that really depends on one's criteria and capital available for distribution to assemble a basket or baskets. The application software vendors that are participating in the products needed to provide the backbone for a business to business environment is also a current game. There are many eBusiness based application vendor games going on in all tiers of the market. One cannot play them all. We could even step outside of the gorilla game and royalty game into the world of godzilla gaming which I now believe lends itself to a fruitful investment environment for at least a portion of my investment money. The entire semiconductor space lends itself to study, but the space is vast and overwhelming for me. Plays like Broadcom, Qualcomm and Intel suit me without digging in too much deeper in the space.

These are all real time, real money, live event games unfolding before our eyes. Looking for the emerging technology, the market needs and possible growth prospects and studying where they are in their respective technology adoption life cycles are key to playing them as a basket.

In some of the games I mentioned above, y/y revenue growth is between 100 and nearly 500% for companies. You can imagine the market multiples being applied to some of the companies on the top end of the growth curve. Some of the games are hovering on getting across the chasm, some are in the bowling alley, some are in full fledged tornado and a lot of effort is going into trying to determine who, what, when, how, why, where, etc... .

A few examples of a space or two, although these as well as many others are all on previous posts on this board:

B2B (No cheap stocks in this bunch)

*i2
*Oracle
Ariba
Commerce One


Fiber Channel Switching

*Brocade
Gadzoox
Vixel
Ancor

*Have earnings


Gotta run give the kids the nightly bath and read some books with them. I didn't get to finish, but the core ideas are hopefully there.

BB

(P.S. I'm spending about 8 weeks in the Bay Area this summer. I will be visiting and touring many Investor Relation departments in Silicon Valley while I'm there. I hope to catch the 'buzz' on what's upcoming and premarket in terms of technology. I miss living there for that reason alone.)





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