Investment Secret of Warren Buffett

Hello friends, in today’s, article we see how warren buffet uses the method for his investment and they become the investment secret of warren Buffett, which comes from chapter 2 of the common stocks and uncommon profits book. This secret of warren buffet helps him to become the $100 billion club person.

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Investment Secret of Warren Buffett

Chapter 2: What ” Scuttlebutt” can do (Investment Secret of Warren Buffett)

So, friends, we know up to now from the stock market we can make a lot of money, just by finding outstanding companies and investing in them.

How do know we if this company is an outstanding company or what, this is only possible by using the Scuttlebutt method? (Investment Secret of Warren Buffett)

So many people say this method, we can’t apply this, so authors say those people if you want to find out an outstanding company, you should have to follow it.

So let’s start, you have to talk with the customer, suppliers, competitors, management, and former employee, by asking these people you get a clear image of the company of relative strengths and weaknesses. these people are right about the company because they are directly involved in the company connection. so these people know better than the outsider broker. (Investment Secret of Warren Buffett)

You can also talk to other people like research scientists in universities and government companies. And you can also talk with executives of trade associations and former employees of the company.

The former employee helps you to know about companies strengths and weaknesses insights so whatever you get the information, you have to make them cross-check, that information because it is very important.

Sometimes an employee is fired and talks bad thought about the company, so you have to ask them a question like, ” why are you leaving the company.” So this question helps you to know if his thought is right or wrong about the company. (Investment Secret of Warren Buffett)

It is not necessary to get you whatever information about the company from any part is almost true as the company shows you. so you have to match it. and compare this information and that information and use common sense and get the right outstanding company.

Read more: The Intelligent Investor book summary

If a Company is outstanding, then the average investor also gets a clear image of that outstanding company. If you like a company by scuttlebutt method, then you to do talk to the management. (Investment Secret of Warren Buffett)

After meeting management people, you can fill the gap present in your clear image of an outstanding company.

if you talk about five companies in any industry, you have to talk about the other 4 companies to one company that you have to invest in that. After asking this, you get the best information about the companies and their strength and weakness. And you get a clear image, of which company is better than the other company. (Investment Secret of Warren Buffett)

While following the scuttlebutt method ( talking to customers, suppliers, employees, former employees, competitors, and management people) we get the information that we know which company is outstanding or not.

READ more: One Up On Wall Street book summary

But now the question is what actually we have to talk about and what we have to know about asking questions they will see in the next chapter. (Investment Secret of Warren Buffett)

So, this is all about the scuttlebutt method, ken(Philip A. Fisher) talks about the diamond point of this book.

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Common Stocks and Uncommon Profits: chapter 1

Hello friends, in today’s article we see chapter 1, clues from the past of common stock and uncommon profits book. In this book, Philip A. Fisher explains how we can learn from history, and how people are makes money in history, in chapter 1, clues from the past of common stocks and uncommon profits book.

Previous introduction part

Common Stocks and Uncommon Profits: chapter 1

Common stocks and uncommon profits Chapter 1: Clues from the past

Philip A. Fisher says by seeing the past of the stock market, they get

People come stock market for only one reason is that they want to make money in the market. So in past, they use two methods to make money in the market.

  1. By predicting the business cycle, and betting on that prediction, they buy the stock at the bad time and sell the stock at the good time. So they collect the information from their connection and know when the bad time comes and when to buy that bad stocks. Those people have more connections that prediction is going more accurately and they make the money.
  2. Finding outstanding companies and holding them in the good and bad times of the business economy. So this method helps to get a low risk and maximum profits. (Common Stocks and Uncommon Profits: Chapter 1)

So comparing both methods, you get a good result for the second way than the first one.

And this second method is more profitable for more people, But you have to identify the outstanding company.

So outstanding companies’ opportunities are also available in past and they are also available in present, and they are maximum in number as compared to the present. Because in past there is only a family business present, and they were only run by a family member, whatever the person is they deserve it or not the company, they run the company.

But in no time, if any family business they are not capable to run the business, they hire the most eligible management. (Common Stocks and Uncommon Profits: Chapter 1)

Another thing is that now businesses are spending more money on research or R&D department. This start form Hitler’s time, in Hitler’s army, there are so many researchers going on weapons, so that’s why they become very famous, so every country knew about the power of R&D. So there from each and every country start developing research and spend money on R& D. (Common Stocks and Uncommon Profits: Chapter 1)

So people make the R&D of commercial products also. Now the company’s revenue of about 20% has come from those products that are actually not even present or developed.

So doing research is good, if you don’t do the R&D, is more expensive than doing R&D.

Bond:

A bond is a very bad investment in the long term because the simple one is infection.

This inflation is more than the bond interest. Your money is going negative when you choose the bond as a long-term investment.

So the bond is only profitable when you have to know how to time the interest rate of inflation in short term.

So get the coupons on the bonds they are very less in value as you give them and buy bonds.

The author says in past we have to learn five things, (Common Stocks and Uncommon Profits: Chapter 1)

  1. those people make the maximum return by identifying the outstanding company, those companies whose sales and profits grow fast than the there industry.
  2. When you have found such a company and hold it for a long period of time, get the maximum results.
  3. this is not necessary for this type of company is small-cap, but company management is intelligent enough to handle the problem of the company, identify the new opportunity for the company to grow, and make the company profitable.
  4. Growth comes from research that, that product is developed from the existing product. ( Growth is associated with knowing how to manage research to bring to market economically worthwhile and usually interrelated product lines.
  5. Opportunities that were present before 25-50 years are now present also and more.

So this knows us from the historical stock market, and money-making strategy.

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Read more: one up on wall street book

Common Stocks & Uncommon Profits

Hello friends, in today's article we see COMMON STOCKS AND UNCOMMON PROFITS book introduction. In this introduction, Philip A. Fisher son write three different prefaces about the COMMON STOCKS AND…

One Up On Wall Street: Chapter 20

Hello Friends, In today’s article we see chapter 20 of the one up one wall street book. In chapter 20 Peter Lynch explains that 50,000 Frenchman can be wrong in one up on wall street book. So let’s see chapter 20 of one up on wall street book.
Previous Chapter

50,000 Frenchman can be wrong:-Chapter 20

One Up On Wall Street: Chapter 20

The Author says 50,000 Frenchman can be wrong.

So all people follow the crowd the only reason is that they think that much of people are right,

so they follow the crowd, by author say’s 50000 Frenchman are also wrong in the stock market.

So in the stock market don’t follow the crowd follow your own way.

So the author says, those small investors can calmly walk in the entrance when there is a  crowd at the existing position. OR

You can exist, when crowded at the entrance position, So at this time you are safe or not killed.

That simply means that The large institution loses interest in any stock, They want to sell that stock.

So in this time, you get a wonderful opportunity in that stock, and you have to analyze that stock.

If that company doesn’t have any problem(earnings are high, profit is good, Plan of future is good, Cashflows also good) but the people sell like crazy.

If they people buy any company at a crazy level, then you have to exist from that opportunity.

Monday Effect:-One Up On Wall Street: Chapter 20

The author says the Monday effect is nothing but,

‘so many people are looking for news on Friday and Saturday and

they will act like buying and selling stocks vigorously in the Market on Monday, that is called the Monday effect.

this effect is very dangerous for the crowd, they will destroy the company and make a tonne of loss of money.

So don’t take the stress of news and don’t act in the market like buying and selling in huge profit margin time.

You have only one work is to analyze the company and track the record of the fundamentals of the company.

So you are taking the stress of News then you act like an impatiently

so warren buffet says, ” Stock market is the vehicle of transport of money from impatient people to the patient people.”

So as possible as stay away from the news.

And don’t become the part of Monday effect.

……………………………………..

The author gives some points from part-3 of this book

Points to remember from part-3: -One Up On Wall Street: Chapter 20

  • Whenever the stock market is declining, it will decline today, tomorrow, or a few years later. So when they decline that is a good sign of the opportunity. So be prepared before the stock market is decline, with search stocks
  • So no one can’t predict the market direction, not for a single year, or someone says I will predict for 10 years so you have to forget about that person. this is not possible.
  • If you want to perform wonderfully in the market, then don’t try to right at any time. so peter lynch says, ” you can make the world record by selecting 10 stocks and 6 is the right stocks.” So don’t try to make money in every business. for this warren buffet says, ” I don’t want to make money in every business at 20% annual interest rates, if I get less than 10, I am happy with that.” So don’t try to be right in the stock market on stocks.
  • Peter Lynch says, ” Those stocks are the winner stocks they always surprise you.” So the author also doesn’t know this the stock becomes the Multi-bagger.
  • You can make more money in the Stalwarts category by making a simple 20 to 25 % gain continuously, so in long term, you make lots of money.
  • If any company is performing very badly, and you think another company is not doing badly, so there is no guarantee. So the company economy changes, so every company is can perform badly.
  • Whether you are right or wrong does not depend on the price of the stock, for example, let’s if the price is up you say, I am right and if the price of the stock is down, and you are wrong, so this not depends. the right or wrong is only to get while in the Long term investment period.
  • In stalwarts you have to focus on only one is ownership of Institutional ownership and how many people are following that stock. So in stalwarts always you get the overpriced company, so understand the fundamental and its Intrinsic price and when the price is down then you have to buy that stock.
  • the losing strategy is buying the average fundamental company and you sell that stock that has strong fundamentals but you sell after the price is doubled this is also a losing strategy.
  • In the Fast grower category, the Fast grower company is not always the fast grower, you have to attention to when the period of fast growth ends and which is the best time to exist for you.
  • So if you don’t buy any stock, you can’t lose the money in that stock, so don’t try to trap in that thinking is like, if I am buying that stock, I will increase my wealth by 50% annual interest rate.
  • So don’t attach so much with winner stocks. if you do that then you forgot about that stock to track.
  • If any company stock price is going zero, here doesn’t matter how much price you are buying that stock. you lose 100% of the money in that stock.
  • So you can improve your money, by simply rotating the stocks. In rotating you have to switch from one stock to another stock with making a profit from that. So time in your favor you can do that, but if they don’t make them or do not get results then minimize your acts of rotating stocks.
  • So don’t try to think like, I want to recover my loss. If you do that then you lose most of the money that is present in your hand.
  • don’t stay in past, whatever happened in that past, so be present in the present time.
  • you have to focus on reaching your financial goal or financial freedom
  • If you think, you can’t beat the market then go through the mutual funds.
  • So lastly, in the market there are always things to worry about, so don’t worry.

So this is all about the One Up On Wall Street book.

Lastly, we finish this book, so from the next article we see the new book summary.

The Best time to Buy and Sell Stock

Hello friends, in today’s article we see chapter 17 of one up on wall street book. in chapter 17 you get some idea about the best time to buy and sell. After reading this article you know the best time to buy a stock and sell at the right time. so let’s see chapter 17 of one up on wall street book.

Previous Chapter 16

The Best Time to Buy and Sell Stock:

When to Buy:-The Best time to Buy and Sell Stock

The Best time to Buy and Sell Stock

In this situation, you have to buy in two important times, they are as follows.

  1. End-of-year tax selling to carry forward losses: During this time some people sell stock that has to lose and save tax or carry forward and buy again that stock.
  2. During market collapses and drop(recession): In this people are get panic and everyone wants to escape from the market and they believe that this is the end of their capital. So this time the value investor take the advantage of him and get into the market.

When not to Sell:-

  1. don’t sell because a stock is doubled its price.
  2. The macroeconomic issue like The money supply increasing or decreasing, the dollar appreciating or depreciating, or whatever happens with the economy. You have to hold until the fundamental of the company is strong.
  3. If you think, you have to sell, then you have to ask yourself why are you buying and what is the main reason for you to buying.

When to sell:-

So the author gives us so many different categories, between which we have to remember some point from each and every category.

  1. Slow growers: In the slow growers’ category, you can sell this stock when you get a 30 to 50% return on investment or If the fundamental of the company is weak. If the company loses market share from the previous one or two years and does maximum diversification and they don’t have any new product, from this situation you can sell the stock. When you buy this stock the company has more cash and negligible debt, but now the company taking lots of debt in reason of expansion, and the dividend yield is not so high, in this situation sell the stock in the slow grower category.
  2. Stalwarts: In this category, you have to see the P/E ratio, if the P/E ratio is high than normal then you have to wait for coming normal by falling P/E and then buy again. In this category, you can sell a stock when the company’s major division is given less than 25% earnings of the company and they have a problem with earning growth. So in the future, no cost-cutting happen in that major division. the company launched a new product they are failing and lastly the P/E ratio is high than the industry’s ratio.
  3. Cyclical: In this category, you can sell when you see this problem, the cost is increasing, the existing plant is working at full capacity and the company spends more money on the new plant. Inventories are increasing and competition in the company is increasing also union contract is an end to expire and demand is minimum and lastly, capital expenditure is doubled. If the above situation is there, then you can sell the stock.
  4. Fast growers: In this category, you have to see some point that looks like a problem in the company, they are as follows, you can see earnings decrease or the company stop to develop a new product. the customer doing more complaints and their complaints increasing continuously. Institutional investors buy a 60% stake in the company, then in this situation, you can sell the stock. or you can see if the company have the maximum publicity and everyone saying buying suggestion. The company P/E ratio is maximum than the growth rate, and the PEG ratio is more than 1.5 and also the company staff management exists from the company and joins other companies. company product sales decreased in the previous quarter and the new product result is poor if you see a company showroom in every mall then the company does not have any space to spread and increase sales.
  5. Turnaround: In this category, you have to see this point If a company operates another company, but they have different industries. And the P/E ratio is maximum than the growth rate and increases in inventories as compared to the sale percentage. The company taking more dept and the dept is increasing as compared to the asset it is very hard to get the sale from the previous customer, then this condition is happening, then you have to sell this stock to another company.
  6. Asset plays:  in this category, your whole game is on the hidden asset value, so you have to see this point, Debt is increased or a 10% stake in the company is increased to 60% then sell that stock.

the above-mentioned point helps you to identify the stock in which category and you have very much benefit from this information to selling the stock.

So this is some point you have to consider while selling the stock. So don’t sell the stock seeing the one or two-point that above mentioned the probability of point is high then you sell the stock.

So this all depends on you. So no one tells the right time to sell, so everyone says the right time to buy the stock and it’s easy to know the right time to buy.