In Search of Big Game: How to Bag a 'Gorilla'
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1. Identify an emerging "tornado."
2. Buy into a "gorilla."
While vigorously mixing metaphors, a new how-to book entitled "The Gorilla Game" (HarperBusiness, $26) aims to enable common, risk-wary investors to flourish in the lucrative but mega-volatile sector of high technology.
Talk about market timing: The book hits store shelves just as the Internet is exploding as one of high tech's wildest risk/return plays.
"When most Internet companies went public 18 months ago, they were clearly concept companies and you needed faith and vision to leap in," says Henry Blodget, Internet analyst at CIBC Oppenheimer in New York.
"Now," says Mr. Blodget, "it's clear some companies will make an unbelievable amount of money." For example, the share price of Yahoo! Inc. rocketed more than 500 percent last year.
"The Gorilla Game" describes how to explore the Wall Street jungle for "gorilla" companies. These firms, including Oracle in database software and Cisco Systems in networking hardware, emerge from the chaos of a rapidly growing market into a place of clear dominance.
The game starts as investors find emerging tornadoes, markets entering a stage of "hypergrowth." Then they buy as many as four stocks that have a chance to become the gorilla in each category.
Gradually, investors cull the field, selling stocks that lose their shot at gorilla status and consolidating their money in the leaders. Finally, a single gorilla emerges. Investors should hold it for the long term.
"Ultimately, we're giving investors the tools to identify No. 1 markets that will go into hypergrowth," says co-author Tom Kippola. "Those markets will generate huge revenues, massive returns, massive profits, and massive jumps in stock prices," he says.
But the game is not formulaic.
"This is not get rich quick," Mr. Kippola says. "You have to learn something" about high-tech industries, he says.
The book lists resources, describes case studies, and ends with a model portfolio in markets poised for "hypergrowth."
"Supply chain is now our favorite space," says Kippola. These companies provide software to streamline the flow of goods from manufacturers to retailers to customers. Two gorilla candidates are Manugistics Group and i2 Technologies.
"The strategy makes sense," says Lise Buyer, Internet analyst at Deutsche Morgan Grenfell. "But hindsight is tremendously useful - a year ago Netscape was seen as clearly dominant [in Web browsers]." Now Microsoft is gaining.
The book's view: Buy both.