Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Hi all, this is my first post to the board and I feel obliged to start with a few caveats. 1) I haven't read the book . I know. I shouldn't even be posting yet. I just couldn't help myself. I ordered it last night and it is winging it's way from amazon to me at this very moment. 2) I haven't taken the time to read every post on this board and it is fully possible that my question has already been thoroughly addressed. A quick reference to a post number would be nice, or you can just ignore me.

Okay, here goes. I own a few gorillas, partly by accident and partly because I primarily follow a mechanical investing approach that seems to throw me into them from time to time. But I've got to confess, the valuations worry me . For instance, I've been reading about Brocade and it sounds like a great company, serious gorilla material, all that good stuff. The same good things can be said for I2, to pick another semi-random example. But these companies have PE's in the neighborhood of 1000. Seems to me these companies could go right ahead and have hypergrowth for 3 or 4 years and still be quite richly valued without any significant appreciation in their stock price. Is this addressed in the manual? Is anyone else concerned that the market is getting wise to this game and discounting spectacular future growth earlier and earlier to the point where it is very easy to be late to the party? Do you gorilla investors even consider valuation, or is the general philosophy that if it's a gorilla, you want it, regardless of price?

Thanks for listening. I promise to wait until I read the book to post anything else.

-DeepBlue
Print the post Back To Top
No. of Recommendations: 0
I want to try a stab at this one even though I an knew.
I have read the book and intend to read it again.

I do believe valuation must be taken into consideration. Stocks can not have infinite value.
I would look for indicators as to when to sell. To me the biggest sell indicator of all time was when some brokerage firm came out with an opinion that QCOM was wort $1000 a share. On what rationale was this made?
It did suck the last round of speculators in on the stock, thinking such gains could go on forever.
I considered shorting it. Not usually wise when it comes to gorillas.

I read on the Fool board that the price of $1000 would require QCOM to license this technology to everyone on the planet CDMA technology within 3-5 years. What chance is there for this to happen within that timeframe? The price of a phone exceeds the monthly, perhaps annual income of many people in the poorest regions of the world.

I now understand that there are other uses for this technology, but were they attainable in a reasonable timeframe to support a price of $1000. The market clearly said NO!

One should always evaluate the price of a stock, compared to SUBSTAINABLE growth, to see if the price merits a buy or a sell. I believe many could have timed an exit on QCOM better than they did.

Admittedly this is easy to see in hindsight, and perhaps easier for me to see at the time because I did not have QCOM, nor had I read the bible at that point.

Print the post Back To Top
No. of Recommendations: 0
Is this addressed in the manual?

Deep, yep, it's all there. Once you've read the book a couple of times, followed the many discussions here and at the boards of some of the gorillas and gorillas-in-making, you will understand what this whole game is about. Warning: This understanding can lead to a distinct sense of smugness around people who insist on berating you for buying stocks with near infinite P/E ratios, impossible valuations, nose-bleed share prices, and other such drivel. You'll get used to it though. :>)

Ted
Print the post Back To Top
No. of Recommendations: 0
Do you gorilla investors even consider valuation, or is the general philosophy that if it's a gorilla, you want it, regardless of price?

When I got the book, one of the first things that stood out was the concept of CAP (competitive advantage period) and GAP (competitive advantage period). What this is is the advantage that a gorilla has in its ability to dominate and the length of time that it can do so. The stock market usually drastically underestimates this advantage. Sure, there may be better times to invest than others (early in the tornado, during a general market downturn or during a individual stock plunge), but the classic gorillas have turned out to be great investments at any point in their lifes. (Check out some of BB's charts) Of course, we can't predict what will happen in the future, but I feel much safer knowing about QCOM's patents than I do about AOL/TWR's cartoon characters.

However, I still don't see how Brocade's switches are discontinous thereby providing them with gorilla status.
Print the post Back To Top
No. of Recommendations: 0
The market clearly said NO!

Ah, but the mark of a truly committed and comprehending gorilla hunter is that once having identified the gorilla, when the market says NO, we buy!

Just my GG biased opinion of course!

Ted
Print the post Back To Top
No. of Recommendations: 0
Correction to my first sentence:
When I got the book, one of the first things that stood out was the concept of CAP (competitive advantage period) and GAP (competitive advantage gap).
Print the post Back To Top
No. of Recommendations: 13
DeepBlue wrote:

I own a few gorillas, partly by accident and partly because I primarily follow a mechanical investing approach that seems to throw me into them from time to time.

Absolutely nothing wrong with your strategy. I assume that it works best via accounts that are non taxable. Being in and out of gorillas whether by accident or design has yet to prove to me a higher reward than the LTB&H approach. Cisco to date since April 20, 1990 is up over 160K %. Now that's a dream return, but I have yet to meet anyone who has bested it by trading in and out based on any sort of model. Perhaps there are some who did best it, but until they come forward - I remain skeptical.

Since you have not read the book you wouldn't know that the authors were trying to target a type of investor who doesn't have the time to adhere to a strategy of timing based on a mechanical approach. I'm not knocking the strategy, believe me. I'm just trying to clarify the gorilla strategy. Also, in times of hypergrowth in an emerging technology adoption life cycle, evertying involved gets thrown way up the beach by the wave to the point of 'extremes'. This, as odd as it sounds, is normal. Therefore, if and when an emerging technology adoption life cycle is created, a gorilla game investor looks for possible gorilla games and candidates within that cycle and either buys baskets which will later be consolidated into the eventual leader as the leader emerges - or another strategy could be used to wait until the leader becomes clear and buy at that point. You would hold the leader from that point and let the law of increasing returns that a gorilla provides go to work for you while you spent time looking for the next emerging technology adoption life cycle.

But I've got to confess, the valuations worry me. For instance, I've been reading about Brocade and it sounds like a great company, serious gorilla material, all that good stuff. The same good things can be said for I2, to pick another semi-random example. But these companies have PE's in the neighborhood of 1000. Seems to me these companies could go right ahead and have hypergrowth for 3 or 4 years and still be quite richly valued without any significant appreciation in their stock price. Is this addressed in the manual? Is anyone else concerned that the market is getting wise to this game and discounting spectacular future growth earlier and earlier to the point where it is very easy to be late to the party?

There is the catch 22. If a gorilla gamer researched these companies early on and took a position that on a cost basis is peanuts compared to the current price - what do they do? Sell because of valuation worries? Move the money into other emerging candidates? Sell a portion to take some profits? Short the stock? Pass on taking a position now based on valuatioin? Hold the candidate throughout the technology adoption life cycle regardless of valuation? Is it the greater fool theory? All are certainly possibilities and it is more up to the individual investor to make the decision based on their comfort level, goals and understanding of the business model going forward. Also, outside of the longer term examples of huge gorillas like Intel, Microsoft and Cisco in the PC and enterprise networking technology adoption life cycles - we don't have enough time tested data to have an exact answer to your questions. Emerging technologies bring about extremes, but how extreme is extreme? How far up the beach does the wave go?

Do you gorilla investors even consider valuation, or is the general philosophy that if it's a gorilla, you want it, regardless of price?

I think it is too much of a generalization to say that one worries or doesn't worry about valuation. Certainly the last five years has been a stunning shift to the technology arena as the importance of the industry has become ever more clear and the weighting of one's portfolio has generally been increasing on the technology front.

There will always be sellers along the way as there are as many reasons for selling as there are for buying. How many millions of shares have been sold of Cisco since 1990 even though the stock continued to go up 160,000+ %? Goals are met, valuations cause concern, diversification and portfolio balancing concerns, etc... . However, there is a certain risk aversion involved in gorilla gaming. This is not to say there is not risk, but if the game is played correctly - the risk can be less than if one is investing blindly in the broader technology arena.

My suggestion would be that after you read the book we revisit the valuation question and discuss it from that side of the coin. There are reasons why certain gorillas are appearing on some of your mechanical screens from time to time.

BB
Print the post Back To Top
No. of Recommendations: 0
Many thanks to all who took the time to respond to my inquiry. I wanted to address a couple of things that Bruce Brown brought up, just to clarify what my intentions are.

Absolutely nothing wrong with your strategy. I assume that it works best via accounts that are non taxable. Being in and out of gorillas whether
by accident or design has yet to prove to me a higher reward than the LTB&H approach.


It is for precisely this reason that I am attempting to educate myself about Gorilla Gaming. I'd like to identify some more LTBH candidates for my taxable portfolio and limit the mechanical stuff primarily to my non-taxable accounts.

If a gorilla gamer researched these companies early on and took a position that on a cost basis is peanuts compared to the
current price - what do they do? Sell because of valuation worries? Move the money into other emerging candidates? Sell a portion to take
some profits? Short the stock? Pass on taking a position now based on valuation?


At this stage in what I hope is a budding GG career, it is really only the last of these issues that I'm grappling with. It sounds like there is no clear consensus on this point and that each individual investor needs to make their own decisions based on their own knowledge/comfort level. Dang. I was afraid you'd say that! :^)

-DeepBlue
Print the post Back To Top
No. of Recommendations: 2
I believe many could have timed an exit on QCOM better than they did.

True, but Gorilla Gaming is a long-term buy-and-hold strategy, not a timing strategy. I certainly could have sold my Qualcomm in early January. I had a strong opinion that the stock was subject mostly to momentum players at the time. I ignored the analyst's expectation of the $1000 pre-split price target, mostly for reasons explained very well in the March 6 Forbes article about analysts.

Why didn't I sell?

Because it's not my strategy to sell every time I think a Gorilla is wildly over valued as I thought Qualcomm and the Naz were at the time. The reason it's not my strategy is because I would then have to determine an entry point to get back into the stock, which becomes yet another timing issue. Timing issues can be messed up big-time by an unexpected press release for the good or the bad. So I stick to long-term Gorilla Gaming and simply hold onto Gorillas until I see a threating discontinuing innovation or a better tornado opportunity in an infant Gorilla.

Having said all that, I do believe investors would be wise to take various factors into account before deciding which Gorillas and candidates to purchase: market opportunity (size), where the product is in the adoption life cycle, and valuation. If I were to find two Gorillas that were fundamentally equal in the first two categories but vastly different in the valuation category, I would certainly go for the lower valuation. However, it's unlikely to find such an easy decision-making scenario.

--Mike Buckley


Print the post Back To Top
No. of Recommendations: 3
I feel much safer knowing about QCOM's patents than I do about AOL/TWR's cartoon characters.

Folks,

It's very, very easy to underestimate the importance of that statement because it so glibly rolls off the tongue. Gorilla Gaming really is all about safety relative to reward. And if you don't think ownership of a proprietary technology and wielding the power over a substantial value chain is safer than the strength inherent in the strongest of brand names, you probably shouldn't be Gorilla Gaming.

--Mike Buckley
Print the post Back To Top
No. of Recommendations: 0
Mike Buckley,

. If I were to find two Gorillas that were fundamentally equal in the first two categories but vastly different in the valuation category, I would certainly go for the lower valuation. However, it's unlikely to find such an easy decision-making scenario.

I'm like many readers of this board in that I hold a number of stocks that are in various stages of the Gorilla Game. I've been reading the book, but non-fiction, especially econ and finance, tends to put me to sleep, no matter how important the message. A carryover, I'm sure, from long ago college days.

Is there any way you more experienced investors in the Gorilla Game could put a ranking on where these stocks fall in the scheme of the book. I'm sure that each stock has been assessed individually but has a list ever been put together.

I feel certain those of us like myself would like to have this information available in making our DD on future buys in this field. If it's out there already, please give us directions as to where to find it.

I really appreciate the informative posts we receive on this board.

Thank you.

Print the post Back To Top
No. of Recommendations: 3
Harry,

I don't think there is a list out there. However, you have to understand the basic concept that the PC technology adoption life cycle that began in 1980 is a little more mature and quite far along in its cycle as opposed to wireless, or front office software, or supply chain management, or interactive television, or enterprise networking, or broadband, etc... .

Drink some coffee, get away from the warm sunshine coming in through the window and try to tackle the book a little at a time.

I couldn't put the thing down the first time I read it and went straight through the book which ended in me being disappointed because it wasn't a couple hundred pages longer. So, I read it again. Then I bought the revised version and read it twice.

BB
Print the post Back To Top
No. of Recommendations: 0
Harry,

Is there any way you more experienced investors in the Gorilla Game could put a ranking on where these stocks fall in the scheme of the book. I'm sure that each stock has been assessed individually but has a list ever been put together.

Mark has a great website that identified industries, companies, where the product is in the adoption life cycle and its status as a gorilla, candidate or whatever. It's a work in progress and like any publication, he'd be the first to tell you that your opinion about some of the classifications might be different.

Unfortunately, I can't find it in my bookmarked pages. I hope someone or Mark will submit it yet again for us.

--Mike Buckley

Print the post Back To Top