One Up On Wall Street

One Up On Wall Street: Chapter 20

March 25, 2021 by Laxman Sonale 9 Comments

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

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.

One Up On Wall Street: Chapter 19

March 18, 2021 by Laxman Sonale 4 Comments

Hello friends, in today’s article we see chapter 19 of one up on wall street book. in chapter 19 author discuss about the new derivatives of stock market i.e. Options, Future, and Shorts Selling. So let’s start chapter 19 of one up on wall street book.

Future, Options, and Shorts Selling:-One Up On Wall Street: Chapter 19

Options: Options is the financial instrument, which have ability to buy and sell in decided price, with time period, is known as options.

Options give the power to deal buy and sell at decided time frame, some time its benefited or some time is not.

Future: Future is also the financial instrument, the contract is established between buyer and seller at decided price, is known as future.

let’s take the example of former, if former want to sell his rice to the other person, so they make the deal on future price, let says, buyer say, i will buy this rice at 20 rupees per kg, whatever the price in future is show, they have to buy the rice at 20 rupees, so this is the contracts. (One Up On Wall Street: Chapter 19)

Shorts Selling: Shorts selling is the technique of selling and buying, in generaly, we are all first buy the stock and then sell the stocks, but in shorts selling, you have the power to sell stock first and buy later. so whatever you sell the stock you can get that stock from the broker. the best shorts selling in history is done in 2003 to 2007, this full detail discuss in movie, i.e The Big Shorts

So financial instrument have some merits and demerits, so future and options have some merits and demerits.

So let’s understand what are the author says, about that (One Up On Wall Street: Chapter 19)

Remember some point on this stuff:

The worst thing in options is that , you were right but you still lost all your money because they event happened after options date expire.
Author say, it’s a wastage of talent, time and money
Peter Lynch says, doing shorts selling is have the unlimited risk, because you buy the share when they fall, but if share goes up, so there is no limit of going up, so there is the unlimited risk. (One Up On Wall Street: Chapter 19)
Future may be beneficial, let’s understand, if A former want to sell wheat or rice crop in future at fixed price, so there is beneficial, or any distributor want to buy that wheat and rice, so they can buy on fixed price.
So peter lynch says, options is the worst things, just imagine of GlaxoSmithKline Company, company have the patent of rare cancer and you know that come in news stock prices goes higher and you buy the options. So option is things that expire at time period. So you have to buy regularly, that options after expire there dates. So if you are right then but that options is expire and news come, and stock price is goes up but you lose the premium because that yours buy in options.
So author says, this is the wastage of time, Money and effort of all things when come in the Options.
So author says, Stock is atleast finance the company, that have it’s some business. So whatever you do in that company as speculation or anythings, so they have the some business. So you are buying the stock is doing of finance the company, but if you are come in OPTIONS there is nathing finance to the company or anythings, but they finance the broker and their house and there EMI. (One Up On Wall Street: Chapter 19)

Shorts selling:

In Short selling the down side is high or unlimited and there is no limit of lose, because they is no also no limit of stock is go up at any price and you get unlimited lose.

Author give the example of Robert Nilsson, they make the shorts in international company, that stock is 70 cents and they increase upto 70 dollar, so he get 100 bagger lose, and they lose the 20-30 millions dollar in short selling.

So be careful doing shorts selling.

Previous Chapter

The 12 Silliest things people says about stock prices

March 11, 2021 by Laxman Sonale 1 Comment

Hello friends, in today’s article we see the 12 different silliest things people say about stock prices. Peter Lynch gives the 12 silliest things people say about the stock prices in chapter 18 of one up on wall street. So let’s see one up one

The 12 Silliest Things People says about stock prices:

If it has gone down this much already, it can’t go much lower: About this thought peter lynch gives one example, one stock has the price of 30 when at buying time, and they go down and come to $13 dollar, So peter lynch things not go more than that means below $10. But that stock is going down up to $4. So thinking like the above though it doesn’t make any sense to the stock price or investment.
people can always tell when a stock has hit bottom: For this thought author says, “Don’t try to catch knife, when they are falling, if you want to catch the knife, first you have to do is that knife come to the ground and they settle on the ground, then catch the knife.” So so many people just assume that they know the fall of stock prices and for that, they make the Short selling and get the maximum losses when the stock goes up. So don’t try to catch the knife, when they are falling. So you have to be patience in buying you stock that you are analyzing. (The 12 Silliest things people says about stock prices)
If it has gone this high already, how can it possibly go higher than this: So many people just think like that “this stock is double and there is the growth cycle is ended and I don’t think so this stock is a little beat higher than this.” So if you are also thinking like that you can’t make the maximum money in that stock. The most probability is that you most of the time miss the multi-bagger stock. So don’t think like that, if you want to sell the stock then ask yourself, why are you buying this stock (initial main reason), or fundamental is weak.
It’s only $3 a share, what can I lose?: The price of a stock in a falling situation doesn’t matter, whatever the price of the stock is $1000, $500, or $3. If they go zero dollars then that doesn’t make any sense. So don’t think like that. So you lose then you have remembered there is also the zero number that you lose, then whatever that price is go higher in multiple of that is go zero again, so zero is also chance to you lose. (The 12 Silliest things people says about stock prices)
Eventually, they always come back? Most of the time people think that whatever the price of the stock is go down then will come back. So for this author says, there is no guarantee is that this price of stock comes back. So hoping this and waiting for the stock to go up is like wasting your time (money). So Don’t think like that, and see the possibility of coming again at the right position price.
It always the darkest before down: People think buying the stock and that stock is not growing, then people say this though, But it does not make any sense and staying with that stock. So there is no guarantee of the stock is go up after some time. Thinking like this stock means you have to die financially with that stock. If the stock is falling badly, and you want to come to some point of price. then you have to think like that, if you lose the 99% in that stock so there is very little means no guarantee you will recover this. So this stock is never ever recovering up to 99%, and it’s impossible to tread near that stock price. So author gives the example of Oil company stock, they buy the stock at $4560 in 1981. and this stock comes up to $2200 in 1983, so people think that the bad or darkest time is gone and actually that stock is going up to $686 in 1985 so there is no guarantee of stock is always the darkest come first or after go, it may happen the darkest stay after also. (The 12 Silliest things people says about stock prices)
When it rebounds to $10, I will sell: So this is not good to sell this stock at $100 means this does not make any sense with at stock. Or you sell at any arbitrary number. there are two possibilities of this thought is 1) if this can’t happen to that at an arbitrary number, and 2) If this happens then you can test the higher return after making above the $100 because you sell the first. So there is no sense of thinking like that.
Conservative stock doesn’t fluctuate much: Most people are thinking about some conservative stock, for this author gives the example of the Utility company. this company is a conservative stock company, and they go down at 80% and you ignore that stock buy saying this thought. So you have tracked the performance of the stock of conservative also with the regular time frame.
It’s taking too long for anything to happen ever: Most of the time the stock price remains the same and people say, it’s taking too much a long time to happen to anything in the company. If you think like that when you sell this stock, and most of the time next day’s stock price reaches high. for this author give the example of Merk company is a pharmaceutical company, this company stock remains same continuously in 9 years. And the earning is increasingly slowly means 14% annually. So the average stock price is the same, so peter lynch says, this stock of the company is very awesome, and the probability is that this stock can become the 3X, 5X, and 10 baggers in the next few months of in a year of one or two, so stay with this type of stock, without thinking above thought. (The 12 Silliest things people says about stock prices)
look at all the money, I have lost because I didn’t buy it: This type situation come in much many time and people says, I didn’t buy that stock, I lose that much of money in that. So for this author give some explanation, he said,” So this is the human psychology, so you have to consider in this stock, you can’t put money, so you don’t get the lose of that, and be happy with whatever you have in your hand, and ignore the other people grow, that you can make the biggest money in the stock market.
I missed that one, I will catch the next one: When Linux company IPO is coming, so many people are saying that this is next Microsoft and everyone is trying to buying only on this thought, is I missed that one Microsoft, I’ll catch the next one. So all know the result of Linux. So don’t think like that, so each and every stock of the company is different so don’t blame yourself. (The 12 Silliest things people says about stock prices)
The stock has gone up, so i must be right or the stock has gone down, so i must be wrong: So don’t think like that, because short term investment not telling you a clear picture of your right or wrong. in short term this only happen is that how many people ready to buy that stock or how many people are not ready for buy that stock.

This is all about the 12 silliest things people say about the stock price from chapter 18 of one up on wall street book.

The Best time to Buy and Sell Stock

March 9, 2021 by Laxman Sonale 4 Comments

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

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

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.
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:-

don’t sell because a stock is doubled its price.
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.
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.

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.
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.
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.
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.
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.
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.

One Up On Wall Street: part 2 : point to remember

February 28, 2021 by Laxman Sonale 1 Comment

In this article, we see part 2 of one up on wall street book. In this part 2, you have to remember the following point from the one up on wall street book part 2.

There is the end of Part 2 of this book, so from this book, you have to remember some points, they are as follows. (One Up On Wall Street part 2: point to remember)

First of all, you have identified the nature of the company, after that, you have to know why are you buying this stock.
After this, you have to put this stock in the above-mentioned category, which helps you to identify the purpose of that stock.
So those companies are big in size, that company is not easy to grow very fast, and those companies are in small size they are grown in very fast and become the multi-bagger.
To see the small and profitable company and they can replicate his concept in another place also, and buy that stock. (One Up On Wall Street: part 2: point to remember)
So stay away from the hot stock of hot industries (at present time is Tesla motor stock in the automobile industry) and which company do diversification then stay away from that also.
Don’t buy the IPO and wait for that stock to do good after IPO and then buy that stock, there is also potential present in that stock.
Whenever you work, you know more about the industry than any other professional investor, and you can identify that stock as early as another professional investor. (One Up On Wall Street: part 2 : point to remember)
If any expert in some field, so you can take a tip from him and don’t make the mistake to ask another field of another field expert.
Dull company and fancy name company stock is always better than the good name company stocks.
So those stock is moderate, which give the 20-25 % growth and 30% growth is ideal growth of that industry.
So you have to see the niche company. if you see a turnaround for those who perform very bad then see how much debt is present in that company. and which type of debt is present, type of debt is matters.
if the company doesn’t have debt then this type of company is never going broke. So you can make maximum money in a turnaround company. (One Up On Wall Street: part 2: point to remember)
So P/E ratio is important if you buy a wonderful company and their performance also wonderful, but you pay the maximum price for that stock is worthless of their wonderful performance. So company progress you have to monitor and recheck the story regularly.
Insider buying is good and company share buyback is also good for that company. and institutional ownership is minimum then also is a good sign.
See dividend record and what happens to earn and dividend in previous recession time. The dividend is given or not.
And stay patient, you are checking regularly stock that means stock not increase.
If you have doubt about buying now or later then buy later that stock.
If you buy stock on the basis of P/B ratio and book value ratio, then check for that is there real book value or not. most of the time the book value is not real. (One Up On Wall Street: part 2: point to remember)
So spend as much as time for stock that much spend you spend on buying refrigerator or air-conditioner.

At least give the one hour in a week for dedicated stock research

the previous chapter

One Up On Wall Street book summary

February 26, 2021 by Laxman Sonale 6 Comments

Hello friends, In today’s article we see the summary of one up on wall street book. In this chapter, the author says, which things we have to check for our stock, so let’s begin a summary of one up on wall street book.

Checklist: For all stocks in general(One Up On Wall Street book summary)

In a company, you have to check the P/E ratio, and this P/E ratio compares with the other company which has in the same industry.
The Company in you has seen how much is institutional ownership. if you see the institutional ownership is very less, then that is good for the company and you also.
In company stock, you have to see insider is buying and companies buying share back. So both point is a positive sign for investors.
The company, the earning of the company is increasing or not. if constantly increase or increase sometimes and decrease sometimes. (One Up On Wall Street book summary)
In a company, the balance sheet of the company is strong or not means debt or equity. So minimum the debt than the equity and decreases timely then that is a good sign.
Lastly, also see the cash position ( In previous chapter 13 author give the example of FORD company, in this company $16 is net cash is present, means ford company is never going down $16. if is going down then buy the more share.)

* So see specifically each and every category:

Slow growers:

In this category, you have to see the company is paying dividends or not and they pay regularly or increase slowly in a constant way or and give dividends in recession time also.
Company is how much percentage of earning pay in the form of a dividend. If they pay a minimum percentage of earnings in the form of dividends then this is a good sign, If they pay the maximum dividend then earning is decreases, and earnings decrease so no money to pay dividends so this is a like vice-versa to each other.

Stalwarts: (One Up On Wall Street: Book summary)

So in this category, you have to see the company is strong or not easily go out of business.
For this purpose, you have to see the P/E ratio to pay maximum money for that stock. if you pay maximum money then their value is decreased.
Also check of company plan related to the diversification of business, if the company is making diversification, then stay away from this category of company.
See the long-term growth of the company is constant grow or decrease in the previous year, and what happens in recession time, their earnings decrease or not.

Cyclicals:

In a cyclical category, you have to see in the company the supply and demand relationship of the product.
And also see the inventories present in the company( if the company is trying to build up, so in this category there is a new entrance, so that is more dangerous and focus on the cycle of the business.
In a company you have to see how much time is company cycle is staying. (One Up On Wall Street book summary)
So you can easily predict the upper level of the cycle of business but a lower level of the cycle we can’t predict easily. If you know that where to start the cycle of a business is good for you, because most of the people don’t know about that.
For example automobiles stock, this business cycle is staying 3 to 4 year and if they fall as bad as to fall and, they also increase in the very good rise of the business cycle.

Fast growers:

in this category, you have to see, which product is selling in the maximum volume of all products of the company.
So you have to check how much percentage of the sale that product on other product, and how much percentage of earning of that product on the other products of the company. (One Up On Wall Street book summary)
So you see the companies growth rate is 20-25 is a good sign if they more than 30 means that are fake growth and they can’t stay constant and they fall in the coming year.
The company is spread well and they are doing the successful operation in other cities, states and country also, so you have to see this. And see the is there any space for the company to grow.
If they are still in one state and have space to grow in another state then it a good sign for expansion.
So this is not like in the previous example of the limited company, in this company, the company is growing all over all mall i.e 670 out of 700 so there is no space for the growth of the company. So if a company wants to grow then they need a new idea and new innovation in their product to expand.
So you have to see also the PEG ratio. This ratio is one or less than one, and stay than is a good sign.
You have seen the company like Gillette, they sell the lezzer which use and through type. So people use their product every time, and the company is growing continuously. and other company which has sold the electronic surveillance system. They spread all over the country and they don’t have any space for sale and this system stays 10 years of lifespan of that product, so what is the company is doing in 10 years. So the growth of the company stops. (One Up On Wall Street Book summary)
So lazzer selling a business is good, then the electronic surveillance system selling business.
Lastly, you have to see how much institutional ownership is present in the company. if as much as less and very as much as fewer analysts follow that stock.

Turnaround:

In this category, you have to see how much debt is present in the company. as much as fewer the debt is good for that company and you have to see which type of debt is present, bank debt or funded debt.
The company is taking debt that is over than the equity then they affect the earning dilution. So in this debt, you can recover the company but the stock of that company is not recovering in the whole life span.
What is the plan of the company to recover from this situation? and they are selling the unproductive branch of the company. and they reduce the cost. and is there any plan for improvement of the company?

Asset plays:

In this category, you have to see is there any hidden asset present in the company. or if present then what is the value of that asset.
You have to see how much is debt, if the debt is more than the asset, then it is the cause of concern. if they have some value than after paying debt then it is beneficial to the company. (One Up On Wall Street: Book summary)
If a company is taking more debt then this is not a good sign or not have a value of the hidden assets.

Previous chapter

One Up On Wall Street: Chapter 16

February 26, 2021 by Laxman Sonale 2 Comments

hello, friends in today’s article we see chapter 16 of one up on wall street book. In chapter 16 we see how to design a portfolio in one up on wall street book. so let’s begin designing a portfolio.

Part-3: The long term view:-One up on wall street book chapter 16

So let start with some knowledge

In the stock market, If someone offers you a 25-30% return from the stock market is unrealistic. Because peter lynch is record is 29% in continuous 13 years.
It may happen you can earn 30% but in some years you earn 2% also some years -20% also. so 10 years continuously 25-30 % return is impossible. (One Up On Wall Street: Chapter 16)
If your long-term record is worse than a saving account, then you have to confirm your techniques of investment have flowed ( wrong).
If you are spending time and effort picking stock, then you have to do better than the stock market index fund. for example, if an index fund gives you the 10% return, then your return is maximum than the 10% of return i.e. 15%.
peter lynch says, ‘ diversification is good but if you buy 20-30 stock only on diversification is not good for your portfolio. so you have to analyze each and every stock individually.
In your portfolio, the author says, ” you can buy 3 to 10 stock in your portfolio. you can do more maximum and minimum also as your wish. So keeping maximum stock means your probability of high of getting multi-bagger stock, if your analysis is good.
peter lynch says, ” you can not be sure on a stock that will become the multi-bagger. If you think out of 10 stock 3 will be become the multi-bagger then in between that only one become the multi-bagger. So if you have maximum stock then you have a maximum probability of multi-bagger stock.
If you have the maximum stock then you have the maximum flexibility of your portfolio. If you make money in one stock then you can easily that money put in the other stock. So easy to switch your money from one stock to another stock. (One Up On Wall Street: Chapter 16)
if you invest in a maximum amount in one stock, then you have to wait to succeed in that stock.
Peter Lynch says, ‘ We are talking about the 6 different categories of stock, if you invest in all this category this is also the good diversification method.” If you think this one category is given maximum return then buy that stock in the maximum amount and if you then this category of stock give the minimum return then buy them in a minimum amount, as simple as.

So let’s talk about risk and return from each and every category

Risk and return characteristics:

Slow grower: In this category, low risk and low return concept, because in this category you can not make maximum money and low maximum money, because they grow like a walking elephant, they grow very slow.
Stalwarts: Low-risk moderate return, in this category, if everything is right in the company, then you can make a profit of a 50% return in just one or two years. if something is wrong in the company then you can lose a minimum of 20% of all your money.
Asset plays (Low-risk high return): If you make the right analysis of the balance sheet of the company then you can make maximum money. If the other side you are wrong then nothing is lost in your portfolio.
Cyclicals: (Low-risk high gain and high-risk low gain) In this category anything is possible you can make money or lose money. If you are right then you become double or 10% or if you are wrong then you lose 90% value of your money.
Fast growers and turnaround: In this, both categories have high-risk high gain. In this category, if you are wrong then you lose your all money, and if you right then you gain 10 baggers or sometimes is 15 baggers.

Some people are sell stock whenever they make some profit and keep those stock that has already lost. for this author says, ” it’s like in your garden you cut the glower and give the water to the garbage.”

Some people sell those stocks that have a loss and keep those stock that has profit in an increase in more so both the strategy is wrong. (One Up On Wall Street: Chapter 16)

If you are not concise yourself if your stock is down 25% and you are a buyer or throughout the thought is that sell stock by decreasing 25% so you can not make money in the stock market.

So stop loss is a bad thing. If you sell your stock by decreasing 10%, for this author say, ” if I am put the stop loss on taco bell company thock so this stock we have to sell 10 times but actually this stock is multi-bagger for me to not selling and putting stop loss.

So stop loss is losing strategy or don’t sell any stock because they are double or you can’t take benefit of multi-bagger so you have to hold stock on fundamental is right.

if you design your portfolio in the above thought, then your portfolio is good.

One Up On Wall Street book: Chapter 14

February 18, 2021 by Laxman Sonale 3 Comments

Hello friends, in today’s article we see the one up on wall street book chapter 14. In this book, chapter 14 is fully discussed the company that you are chosen by giving some story to them. In this book chapter 14 of one up on wall street, we see that story is perfectly running or not by rechecking the story. (One Up On Wall Street book)

How to recheck the story:-One Up On Wall Street book

1. Read quarterly reports regularly:

You have to check every quarterly company story by checking quarterly reports. So what you think about the company before investing in that and now after the quarterly report is the same thing is remains same or not.
And also check the earning is increase or not. the company store, people are visit or not and their product sale is increasing or decreasing. And also the loyalty of product is increase or remain same. (One Up On Wall Street book)
For understanding, this concept author gives the example of The limited company.
the limited company has 670 stores in the USA, in total store in the USA is about 700. So the company is spread all over the country. so explant the business of the company is there no space for traditional strategy.
So if a company want to expand they need the innovative idea to expand. So in that time as an investor, you have to take the exit from this company if the company nothing to do to expand. (One Up On Wall Street book)
The author gives another example of a company i.e. Mcdonald’s.
Mcdonald’s expand itself in innovative ways, they never stop to expand and increase their profit. When Mcdonald’s spread all over the USA, then they try to found the different or innovative way to make a profit, for example, is dining, breakfast and try to spread in a foreign country. so the company takes the decad of year to spread all over the world. and they also open home delivery. So this type of innovative idea uses to increase profit and spread the company. (One Up On Wall Street book)
Another example is the Texas Air company.
Texas Air company is when the author found they are in bad condition and after that, they come to the good condition. For this type of company, you have to check the story behind this miracle situation.
If any company is bad in fast and now is good, is that not means that this company is not going again bad condition. So for this, you have to check the company story continuously, and always the company in tracking.
And don’t become the emotional fool, if the company is good and stay better.
So Texas Air is a company that buys the continental company and they do continental company as a turnaround. (One Up On Wall Street book)
So the continental company is the low-cost carrier company. So Texas Air company also acquire the Eastern company. And they try to turnaround this company also. But they don’t do, because increase the customer complaints and also the employee union problem. So author also ignores this problem, but they realize this problem.
then the author says, they make here two mistakes, 1) Eastern company is becoming turnaround by trying Texas Air company but they don’t realize the employee problem and also their union problem. and 2) Ignore the Delta airline company, When eastern company performance is not good then that time Delta perform a very good job, so whatever the loss of the eastern company, that benefit the Delta airline company. (One Up On Wall Street book)
So Delta airline is the major competitor of the eastern company. So those people travel by the Delta and eastern company, they know the problem of the company and also the which one is good or bad.
So that people can understand which company gives the perfect investment return.

So this is all about rechecking the story of the company. So if you find the company and make the company analysis and make investment and also you have to focus on that company. I know this is a boring job, for that warren buffet says,” Investing is simple but not easy.” So people can bethink about how much company have in our portfolio, for this Peter Lync says, ” Put that much company in your portfolio, like how many children you have in your family.”

Previous chapter

making an investment is the other part following that company is the important part. So this is all about the rechecking story of the company.

Visit the value investing website: Investing math is so simple

One Up On Wall Street: Chapter 13

February 13, 2021 by Laxman Sonale 5 Comments

Hello friends, in today’s article we see the different chapter 13 of one up on wall street. In this chapter, you get the quantitative part of one up on wall street book. So from this chapter 13, you get which term is important in the balance sheet for looking at investment. so let’s begin.

Previous Chapter 12:

Some famous Numbers:-One Up On Wall Street: Chapter 13

so come in direct point let start with Percentage of sale

1. Percentage of Sales:-One Up On Wall Street: Chapter 13

In a company you have to see which product is selling very fast, as well as the quality of sale, is increasing, means you have to found the product that product sale is maximum. So you have to see the how the percentage of the sale that represent of company. (One Up On Wall Street: Chapter 13)
To see the sale account and how much account of profit that product is given.

2. P/E ratio:-One Up On Wall Street: Chapter 13

so let see the famous ratio that is the P/E ratio. So while looking for the P/E ratio. and then don’t only look at the P/E ratio look also at the company growth, which means earning in growth and compare with them.
If the P/E ratio and company growth are equal that means the company is fairly priced.
So here Peter Lynch talks about the PEG ratio. If the PEG ratio is 0.5 then that company is very good for investment. (One Up On Wall Street: Chapter 13)
If the PEG ratio is less than one then the company is good for investment, and if the PEG ratio is more than one then that the company stock is overrated.
If that PEG ratio is more than two then don’t buy the company stock. So let’s calculate the PEG ratio
The PEG ratio = (P/E ratio)/EPS Growth
So author gives the other things about considering the P/E ratio. (One Up On Wall Street: Chapter 13)
The dividend yield is added with the long term and that sum is divided by the P/E ratio. If you get the ratio is more than 2 then is a good investment and if you got 1.5 ratios then it is also ok.
But if you got the ratio is minimum than 1 then don’t buy that the company stock.

3. Cash position:-One Up On Wall Street: Chapter 13

If the company has maximum cash on the balance sheet then that company is very strong. In the previous chapter, we see the how-to calculate cash per share.
So the author gives the example of a ford company, In company, the stock price is increased from $4 dollar to $ 38, and wall street investors think this stock is overpriced. so let’s see what happen
But in the company, $16.3 of net cash is present at that time, which means if you buy that stock you get the $16.3 cash per share is completely free. (One Up On Wall Street: Chapter 13)
So do calculations, : $38 – $16.3 = $21.7, so P/E ratio is calculate on $21.7 price not on $38 price. so the P/E ratio is about $3.1, so the P/E ratio is 3 which means is a very good P/E ratio.
Ford company also has another insurance subsidiary name is FORD CREDIT.
and his subsidiary earning per share is $1.66, and the same similar company that P/E ratio is 10. If we calculate share price, in that time market trade is about $16.6 in market. (One Up On Wall Street: Chapter 13)
So interesting things is that ford stick is $38 and net cash $16.3 and if their subsidiary trade is $16.6, so you have to do the simple calculation: = $38 – $16.3 – $16.6 =$5.
So you have to buy the ford company at $5, which means that earning per share is 7, and you give $5 so you get the $2 free.
So some company looks like ford but they have the above stuff inside on balance sheet, just we have to think like a businessman. (One Up On Wall Street: Chapter 13)
So author also gives another company example for comparison, let’s see the company name is Boin
it has more cash and their shares price is about $42, and net cash is about $27. so make calculation and you get = $42 – $27 = $15.
so hence no difference in both above company. So ford’s company type of opportunity does not come again and again. so sometimes maximum cash also not affect the company’s goodness, and also if the company has maximum debt or NOSO(Number of shares outstanding) that time also not affect the company having maximum cash. (One Up On Wall Street: Chapter 13)

4. Debt factors:-One Up On Wall Street: Chapter 13

debt factor is the most important factor for identifying the value of the company. So you have to look at the company how much debt or equity.
If 75% are equity and 25% debt, then this company is a good company.
If 90% are equity and 10% debt then this company is a very good company.
If 80% are debt and 20% equity then this company has the weakest balance sheet. So in this situation, you have to focus on the turnaround company, as special attention.
If the debt is maximum then the company can’t become a turnaround company. You have to see in the company which type of debt are they carrying. (One Up On Wall Street: Chapter 13)
one is bank debt and another is funded debt. If they have bank debt, then the bank sees your performance and they realize you can’t do better then they liquidate your company and take their money from it.
Funded debt is the type of debt in which there is no power to liquidate your company, which means you can get the time to recover your company as a turnaround company.
If you select a company then see which type of debt is present on them.
Peter Lynch gives the example of Crysler company, This company becomes the turnaround because they have government-guaranteed debt that is helpful to recover the company. If they have the bank debt Crysler company also can’t recover itself. (One Up On Wall Street: Chapter 13)

5. Dividends:-One Up On Wall Street: Chapter 13

Peter lynch give the example to understand the term of dividends, so let’s see
If any company stock price is $20 and giving a $2 dividend, then this stock giving a 10% dividend yield.
If its stock price is down to $10 and they also give $2 at this time also, means its dividend yield is 20%.
So this stock maximum people buy because this stock comes in the floor means this stock never go down by 10%. So if the dividend price is $2 means the dividend yield is high so people can’t go this stock is down.
If you buy stock for dividends, then you have to see the history of the company. In history, you have to look for 20 to 30 years. (One Up On Wall Street: Chapter 13)
In this period if the company misses any dividend. so this is very important because if you buy slow growers and they miss dividends, then this stock does not become double in number. so you are found in a trap. so always check for dividend yield. (One Up On Wall Street: Chapter 13)

6. Book Value:

In book value, you can’t buy the company because the stock is less than book value, so don’t need to buy the company stock. Because book value can be overstated.
It may be happening if the asset value is not that much seen on the balance sheet. If you buy any stock on book value then check the real value of the asset at this time and confirm that the value is the same as to see on the balance sheet. (One Up On Wall Street: Chapter 13)
If you do not see this then your strategy of investment is 100% fail.

7. Hidden Asset:

In the company, sometimes see are understated on the balance sheet. Sometimes parent company is very cheap than the subsidiary. so focus on also his opportunity.
Many times happen with a foreign company and their subsidiary, so the parent company is cheap than our domestic company.
So careful of any hidden asset, and also see any tax law carry forward point, this is also a hidden asset. Because you don’t need to pay tax in future.

8. Cash Flow:

Peter Lynch says, ” stock price $20 and annual cash flow is $4, means 20% return on cash. If you get the stock like that the stock price is $20 and cash flow $10, which means you get a 50% return on cash for this stock.
For this stock peter lynch say, sell your house and take the loan for investment purposes, because this stock is minimum in number. (One Up On Wall Street: Chapter 13)

9. Inventories:

If the company increases inventories, so this is a bad sign, and also if inventory increases as fast as sales then this is the worst sign for the company.
and also you see the companies inventory is placed at the corner of the parking lot, so that also a bad time. This company can become a turnaround, so for this, you have to wait for this but not necessary for this company if the company happens. (One Up On Wall Street: Chapter 13)

10. Pension plans:

If you looking for a turnaround then also look, in the company, there is also any pension plan.
If there is a pension plan that comes underfunded, means that the pension obligation is more than the pension asset, so this is the cause of concern. (One Up On Wall Street: Chapter 13)
To solve it first then you can invest in the company.

11. Growth Rate:

If you get a business that increases the price of the product is continuously and people also buy that company stock and they don’t lose market share also.
Most of the time this type of product is present in cigarettes, liquor, drugs, etc, so this is a good investment but one cause is that you have to focus.
When someone is died because of a product and they do complain against the company and in between that one person wins then, the company has to pay the maximum money for his penalty. so this risk comes in this company. (One Up On Wall Street: Chapter 13)
In growth rate author say if any company has a 20% growth rate and its P/E ratio is also 20, and another company has a 10% growth rate and a P/E ratio is 10. so let’s what is a difference in that.
20% growth rate company is good than the 10% growth rate, let’s see how.
If a 20% growth rate increase in earing after 10 years the earning rate is 6.19, and if the P/E ratio comes 20 to 10, still company stock price stays 61.9. (One Up On Wall Street: Chapter 13)
and another company that growth rate of 10 increase in 10 years, the earning is growing like 2.50 time, and if their P/E ratio stays 10 then the company stock price is 25.9.
So this is the huge difference between the 20% growth rate and 10% growth rate.

12. Bottom line:

Profit after tax is called the bottom line or also called net income.
So different industries have different bottom lines.
If Company is in the same industry and the profit before tax company to each other and if the company profit margin is increased by 2% so their earnings are increased by 20%. so this is a big factor.
If that company’s profit margin is high they have maximum chances of survival in bad condition because some little losses increase or profit margin is minimum then they are going down. But when this company comes in recovery, this company become the double or triple also, means if 2% becomes 4% 6%. (One Up On Wall Street: Chapter 13)

Remember:

If you want to hold stock for a good or bad time for the long term, then choose the high-profit margin stock. But you want to see a turnaround then look for a low-profit margin so this gives a good return.

One Up On Wall Street: Chapter 12

February 4, 2021 by Laxman Sonale 4 Comments

Hello friends, in today’s article, we see chapter 12 of one up on wall street book. this chapter helps you to know more about the company by asking simple questions. One up on wall street book chapter 12 helps you to find out the best questions you have to ask the company and broker.

Previous Chapter 11

Getting the fact: One up on wall street chapter 12

In this chapter, you get more information about the stock by asking the following questions. if you want to know more about the company ask the following point. (One Up On Wall Street)

1. If you have a full-service broker, ask them some good questions:(One Up On Wall Street)

How you classify this stock as a cyclical, slow grower, fast grower. in this situation most of the time they fast, grower, because they are giving you advice about the stock.(One Up On Wall Street: Chapter 12)
then again ask about Recently growth in earning. What is the P/E ratio from a historical level?
If they tell you to buy now this time, then ask why now buying is good? And this company before buying is why not good? What happens suddenly in the company?
What is the company business and which business comes with maximum profit and how much spending on the growth of the company? (One Up On Wall Street)
How finance the company by doing issuing equity or taking maximum dept?
in this company any insider buying or not and give the analyst report of your analyst, I am study first and then come again ask you some good questions.
You have seen the price and earing report charts report of five years. And also ask the dividends of the company if the company is giving the dividends, then ask how much time pay the regular dividends and any growth in dividends in history to today. (One Up On Wall Street)
In the company is there any institutional ownership or not, if the answer is yes then check how much ownership is there in the company. if the institutional ownership is more then is a good sign for the company.
How many times your analyst follow this stock.

2. Call Investor relations: (One Up On Wall Street)

You can ask some questions directly to the company by using call investor relation. Then ask some question they are as follows
Plan of the company for debt reducing, and what is about that recently launch the drug, if they are a pharmaceutical company or that product. (One Up On Wall Street)
what is the effect on earnings? and how much sales of that recently launched the product in this year?
In this year how much company is opening a new outlet? and also how much percentage the market share increases?
The company is operating at the full capacity of the plant. yes or no.
Properties in the balance sheet that market price value are how much?
If you don’t have any above stuff question, then ask simple two questions 1) What are the positive of the company this year and 2) What is the negative of the company this year. (One Up On Wall Street)

3. Visit the company’s headquarters:(One Up On Wall Street)

Visiting company headquarter ask these questions, they are following
Any fund manager or analyst come in this headquarter. If come in two or three year then, this is a good sign for us, because this company is not followed by any fund manager or analyst.
If the companies headquarter is situated in like that place is not easy to like everyone to go and see.
The good earning and cheap headquarter is a good sign for us.(One Up On Wall Street)
If the company headquarter is used expensive furniture and expensive things in headquarter, then this company is not using the right place of money, so this company loses earnings in the future. So peter Lynch gives some examples is Pepboys and crown cork and shield.

4. Attend annual meetings:(One Up On Wall Street)

you can attend the annual meeting of the company, and talk to executives about the company.
Peter Lynch meets the company executive of XYZ company and ask about that company. Then after that Peter Lynch search the proxy statement of the company and they got the result is that the stock and stock option of the company is about $100 million. (One Up On Wall Street)
And this company’s P/E ratio is high. So if the author wants to increase his income double, then the executives of the company’s net worth also become $200 million.
So becoming this is unrealistic, so peter lynch never buys that stock, and sometime after the stock is going down.
If you think some executives do not become that rich then most of the time you are right.

5. Visit stores, buy and or taste product:

You can visit the store and ask some questions like that.
Ask questions to users of products like, Why you buy this product? and how much time is gone by using this product? and also can you recommend this product to other people. (One Up On Wall Street)
If one or two people give a bad review of that product, then is this no big deal.
So author gives the Apple company example, is that The Apple company is failing in mid-time but this time also in Peter Lynch office order the 7 to 8 macintosh computer and his wife also order macintosh, but the author doesn’t realize this stock and they lose the Apple company. (One Up On Wall Street)
This company can become the turnaround company, and you know the price of Apple Company in today’s day.
And The author also found the Crysler company that also fail for some time but this company become a turnaround by a person name is Lee Iacocca.
Then Peter Lynch calls Lee Iacocca and asks about the plan of the company regarding this situation and they love the plan and they think the plan also is going to execute. then they buy the Crysler company and this company becomes the turnaround. (One Up On Wall Street)

Read more on the previous chapter

Read Annual Report:

Screw the initial colorful pages and come to the annual report, and ask this question about the annual report to you, they are as follows

Cash and marketable securities: you can see how much increase by comparing to the previous year. If increase then this is a good sign.
Long-term debt: In this year and compare with previous year debt. if this debt is minimum than the previous year, if yes then good sign.
(Cash + market securities) > Long term debt: If this is happening then is a good sign by comparing 10 years of the balance sheet.
NOSO: If the Number Of Share Outstanding is decreased then the company does the share buyback, so this is a good sign. That is not mean is that buying buyback any time. you can check for a previous year’s buyback to share.
Net cash per share= [ ( cash + market securities) – long term debt]/NOSO

By asking and seeing the above stuff you get more information about the company.