common stocks and uncommon profits ediz Archives

Common Stocks & Uncommon Profits: Chapter 4

By Laxman Sonale April 7, 2021

Hello friends, In today’s article we see what to buy: applying this to your own need, from chapter 4 of Common stocks and Uncommon Profits book. Chapter 4 helps you to find which stocks we have to buy and what is the reason for that from the Common stocks and Uncommon Profits book.

Previous Chapter

What to buy: Applying this to your own needs:-Common Stocks & Uncommon Profits: Chapter 4

After studying the 15th point, we have some, like, This work is done by myself, or finds some expert.

There are three stocks, Large-cap, Small Cap, Mid Cap category stocks. So between that which stocks we have to choose.

Which stocks do we have to buy, those that pay the dividend and without paying the dividend stock? this all depends on your need.

People have misconceptions about successful investors. They are thinking, Investors are bookish person, that only read a balance sheet and analyze the financial statements. (Common Stocks & Uncommon Profits: Chapter 4)

If you think like that and work like that, then you get the stock at a bargain price. But after some time these stocks become the value trap.

So, friends, this is the book for making money while taking low risks.

This is only happening by buying growth stocks, and growth stocks are giving each and every decade a 100% return on investment.

So the author only talks about these growth stocks that give 100% return by staying 5 to 10 years. with it.

The authors say, Investor only gives some time to his investment, suppose you have the ability, and time also. (Common Stocks & Uncommon Profits: Chapter 4)

But maybe don’t have time to meet the customer and supplier. If you have time to talk but don’t know to talk to the customers and suppliers and do not know which type of question you have to ask.

If you have all the above things, but don’t have to develop an interest in people to talk with you, that tell you all information about the company.

If you have all this ability, then you may not have judgment power to get the meaning thought on that information or if this also has the ability. (Common Stocks & Uncommon Profits: Chapter 4)

if maybe happen, your geography is not good, for example, you stay in the village and this person is in the city so you can’t meet them.

If you face any of the problems above discussion, then take advice from experts. So don’t try to be your own doctor and lawyer.

So this principle also helps you to find good experts.

If you choose any experts, then you have to see their 5 years records,

If they have a good record then only then give them money. If not then don’t give money.

See advisor is honest and others ask him investment philosophy that studies in this book. then that better adviser then you know how they got the five years return. (Common Stocks & Uncommon Profits: Chapter 4)

by timing the market or investing in the marginal company or following this 15th principle, that is why you have to see his five-year result return.

Three types of the company by following 15 points you get the outstanding company in that.

Large-caps: Those companies have good profits and better financial positions or also called institution stocks because insurance companies invest in them. For example Dow Chemical, Du Pont, and IBM from 1946 to 1956, three companies’ stocks are going 5X in 10 years and dividend returns go from 2.5X to 8 and 9 % in the original period and this is not an unusual period this is a normal period.
Small and young companies: they have outstanding management and research scientist are capable for example, Amplex stock in 4 years is going 8X.
Between large and small-cap companies ( mid-caps): Small companies give you 1000X gain in 10 years. if you are wrong then one dollar penny does not remain, so the skilled investor can be done a mistake.

Large companies losses are usually temporary, if you buy the right time stocks (Common Stocks & Uncommon Profits: Chapter 4)

So what is a good time we see in the next chapter?

How much money invested in large-cap companies stocks gives more profit but not that much, those give small companies.

How much money to invest in large-cap companies’ stocks or how much in a small company all depends on you.

Profits from big companies are minimum the total loss outway, that happens in a small company.

if a small company is successful then they become a large company.

* High-dividend yield vs Low-dividend yield growth stocks:

Small investors can not live on dividends, whatever amount of a dividend of high, because their overall investment is small.

A small investor has to be sufficient emergency money for their circumstances. If after that some money is behind then only invest for the long term.

If investors’ circumstances are like they don’t need dividends, then the author says, they have to invest in the company and have to compound their money. (Common Stocks & Uncommon Profits: Chapter 4)

The author’s personal point of view says Small dividend income is not important as after a few increases in maximum income and the author’s sons have a chance to become wealthy in these stocks.

Every stock depends on two things

How skillfully do you apply this 15th principle
Matter of good luck

Good luck is best for one stock, if you have maximum stocks, then luck is an average one. luck only matters when you have only one stock or a few.

the author says previous 35 years that many studies on high dividend stock and low dividend growth stocks. Each stock outperforms in a 5 to 10 years period.

Surprisingly these stocks have increased their dividends such that they were paying greater dividend return on original investment ( though dividend yield is still the low company compared to increased stocks price) than high dividend yield stocks.

So this is all about chapter 4 of common stocks and uncommon profits.

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Investment Secret of Warren Buffett

By Laxman Sonale March 30, 2021

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.

Previous Chapter 1

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.

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

By Laxman Sonale March 29, 2021

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: 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.

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.
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)

those people make the maximum return by identifying the outstanding company, those companies whose sales and profits grow fast than the there industry.
When you have found such a company and hold it for a long period of time, get the maximum results.
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.
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.
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

By Laxman Sonale March 28, 2021

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…