Today's market is largely ruled by the institutions, moving perhaps 3/4 of the entire market. Retail investors are subjected to their mercy. Institutions can move price up or down depending on their action.
Rather than "spotting" the institutional players (more on EMH later), perhaps value investors find their playground in smaller, "non-branded" counters where institutions are likely not involved?
Quote:Most of the major money management firms consider only large-capitalization securities for investment. These institutions cannot justify analyzing small and medium-sized companies in which only modest amounts could ever be invested. To illustrate this point, consider a manager at a very large institution who oversees a $1 billion portfolio. To achieve reasonable but not excessive diversification, the manager may have a policy of investing $50 million in each of twenty different stocks. To avoid owning illiquid positions, investments might be limited to no more than 5 percent of the outstanding shares of any one company.
(28-12-2010, 04:35 PM)Musicwhiz Wrote: [ -> ] (28-12-2010, 04:24 PM)bb88 Wrote: [ -> ]While Gartner is involved in tech sectors, the hype cycle concept can be applied to elsewhere as well. Sellavision, MLM, REITs, Omega-3 products, smartphones, tablets, etc. are all subjected to the same cycle no?
PLC and hype cycle are similar but the focus differs. PLC illustrates the end-state. Hype cycle outlines the fundamental philosophy if I may on what underlies the product acceptance/evolution.
PLC does not show how products are accepted but hype cycle shows the considerations.
Yep, all those products and services you mentioned are also subject to the same cycle.
Thanks too for explaining the differences in PLC and Hype Cycle. It's really a very useful tool.
Glad that you find use for the hype cycle. To answer mikh, the hype cycle is not really something new. Upon seeing it, it does appear to make lots of (common) sense that we all can relate to personally by observation even if it is not backed (to my lay knowledge) by academic theory or empirical data. Whether the hype cycle is a hype, it's just yet another tool to help us analyse. It may not be perfect, but so long as we use it accordingly, it's competent, agree?
I brought up the hype cycle as it reminds of the need to consider another perspective when trying to understand a company's product strategy. Just like PLC is a tool commonly used by marketers, other functions such as R&D and investors can use it alike for the insights it provides.
We can perhaps link the recent credit crunch to the same hype cycle. Credit swap notes is the new trigger. Everyone was (mis)led into the instrument as being safe while generating good returns. As more was sold, more hype grew around it. Banks and investors bought big time into it having great expectations. Then the bubble burst. Everyone realised the flaw in the instrument/system. People are now disillusioned with anything credit swap or minibond? Or perhaps there may come a time some years down the road that the instrument is redeemed and a "new and improved" version will come along to become a decent financial instrument?
Having gone through nearly half the book now, I can map the hype cycle to the several counts of financial innovations that was mentioned. Junk bonds, interest only, principle only, etc.
I think the value of the hype cycle to is exercise prudence and not get caught in the apparent web of deceit/expectations/marketing/etc.
Any of you fell into the trappings of investing into something just to be more invested only for the "it's the best thing I can invest now although it did not really meet my criteria"? By definition, value investors are absolute-performance-oriented and would rather hold cash if there're no stock that meets their criteria, and would not readjust their criteria if only to buy in a stock.
Quote:The flexibility of institutional investors is frequently limited by a self-imposed requirement to be fully invested at all times. Many institutions interpret their task as stock picking, not market timing; they believe that their clients have made the market-timing decision and pay them to fully invest all funds under their management. Remaining fully invested at all times certainly simplifies the investment task. The investor simply chooses the best available investments. Relative attractiveness becomes the only investment yardstick; no absolute standard is to be met. Unfortunately the important criterion of investment merit is obscured or lost when substandard investments are acquired solely to remain fully invested. Such investments will at best generate mediocre returns; at worst they entail both a high opportunity cost—foregoing the next good opportunity to invest—and the risk of appreciable loss.
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Absolute-performance-oriented investors, by contrast, will buy only when investments meet absolute standards of value. They will choose to be fully invested only when available opportunities are both sufficient in number and compelling in attractiveness, preferring to remain less than fully invested when both conditions are not met. In investing, there are times when the best thing to do is nothing at all.