Hello friends, in this article we see chapter 7 of One Up On Wall Street book. In chapter 7 we see the I’ve got it – What is it?. The author in this chapter 7 gives some advice to remember the basic term of analysis. In this chapter how much you have to put in your effort. So let’s see step by step.
Peter lynch advice to Remember:-One Up On Wall Street: Chapter 7
- Investing in any company without doing research, is like playing the stud-poker game without looking at the cards. (One Up On Wall Street: Chapter 7)
- Always remember that you have to put as much effort into picking stock, as you do into buying your groceries. (One Up On Wall Street: Chapter 7)
- Size of the company matters: So the investment return, is all about the size of the company. if your company size is maximum then your return on investment is minimum. Because big company growth does not grow as fast as a small scale company. Always see the company industry and also the company which produces how much of profit from the industry product. If your industry is grown, and your company produces 15% of industry product. then your company is not growing as much as the industry. so the author gives two examples of a company that industry is growing but not the company. For example, Charmin cream and pampers of P & G. this company produces a cream that women can use. Another company is Hanes, this company produces legions of ladies. this company product is very famous at that time. (One Up On Wall Street: Chapter 7)
So the author separates the company into different categories to identify which company gives how much return. So let’s see step by step.
- Slow Growers: In this category, include the big company. This company’s growth is so small. So whenever the company is big, it is impossible to grow like a small company. this type of company gives regular dividends. Sometimes this company’s dividends are maximum that your investment for the long term. The Warren buffet investment strategy includes the Dividends factor. So Slow Growers grow like the GDP of the country. The is the best investment for the mutual fund manager and that individual investor who needs the safety principle. (One Up On Wall Street: Chapter 7)
- Stalwarts: In this category, including those companies that give the annual growth of 10-12% investment return. This type of company gives a 30-50 % profit from your investment. This profit you can make in 1-3 years of investment. So this type of company is giving the minimum return as compare to the small size company, but give the maximum return than the slow grower’s company. (One Up On Wall Street: Chapter 7)
- Fast Growers: In this category, include the fast-growing company. The fast-growing company is like a Small Company and New company. this company grows very fast and gives an annual 20-25% return on your investment. Sometimes it’s growing like 10 baggers, 100 baggers and also 200 baggers. If this type of company you got, you just need 1 or 2 companies that will make you rich. But as much as a return, then as much as risk include in this category. (One Up On Wall Street: Chapter 7)
- Cyclicals: In this category, include those company, which have seasoned business. And this business coma again and again, so the cycle of business continuously round. This business increase and also decreases. So if you want to make, money in this c0mpany. you know the business cycle and also very important is to escape before the cycle end. in this category give a double return on your investment. this company totally depends on the economy. So in this company, the loss is 80% of your investment. (One Up On Wall Street: Chapter 7)
- Turnarounds: In this category, the company is coming from a loss. So this type of company gives the maximum profit. but most of the time the company can go bankrupt.
- Asset Plays: Asset plays, those company, which have an asset whose value is maximum than the balance sheet asset value written. In the balance sheet, the book value of assets is minimum as compared to the present time. Pebble beach company has a 25 million dollar asset, but its price is 30 million dollars. So this company is cheap. (One Up On Wall Street: Chapter 7)
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let’s see some advice from the author which help in the category of the company.
- Companies don’t stay in one category forever, for example, international Nickel.
- There is no point in treating a Walmart, as a stalwart. So you know the time to sell.
- Categorization is important. so that you know, when to get out of that stock.
This is all about chapter 7 of One Up On Wall Street book. If you got the above idea then you are able to know the company investment return.
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