asset plays

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 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.