common stocks and uncommon profits ediz

Common Stocks & Uncommon Profits: Chapter 4

April 7, 2021 by Laxman Sonale 9 Comments

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

March 30, 2021 by Laxman Sonale 4 Comments

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

March 29, 2021 by Laxman Sonale 1 Comment

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

March 28, 2021 by Laxman Sonale 1 Comment

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 UNCOMMON PROFITS book. This introduction helps you to know which parts of this book are very very much important and which other parts are the most valuable. So let’s starts with the first preface.

Introduction:-Common Stocks & Uncommon Profits

Ken Fisher wrote three prefaces, let’s starts with the first preface

What I learned from my father’s writing:-Common Stocks & Uncommon Profits

Ken fisher says, his first stock is reverse 10 baggers, which means if they buy the $100 stocks and that stocks go to $10. So that loss is 90% means 10 bagger reverse stocks.

So ken fisher say’s, ” he is not the clear or topper of the class in college and school, and not even completed his higher education from a famous university like Harvard University or nothing his special accomplishment they have to write in this preface.” (Common Stocks & Uncommon Profits)

But they got the 15 points from in COMMON STOCKS AND UNCOMMON PROFITS book, and now they manage the billions of dollars in his funds. So if they do without doing anything is special so any buddy can do better in the stock market by applying these 15 points.

Ken say’s, ” In this book 15 points directly say the how to buy the company if you want to maximum profits, and if you compare that stocks with scuttlebutt method then you know company actually what is the business and how it grows and what problem comes in this process.”

Scuttlebutt method:-Common Stocks & Uncommon Profits

In this method, you have to talk companies employees, suppliers, competitors and customers,s and also the management of the company. Why this person? because these people know they know what is going in the company and clear the image of strength and weakness.

The customer tells you about the product and why they people buy again and again, and how they know about the new products means service and marketing department information.

The supplier tells, about the raw material side or inventory of the company.

Competitors say how the company is strong and its weakness. (Common Stocks & Uncommon Profits)

So this information you get by following the scuttlebutt method, so this information you found on the main street, not on the wall street or Dalal street, So this information is good and trustworthy.

If you want to collect information from wall street, then you face the dot com bubble candlesticks so you get the information from the main street is safe and trustworthy than the wall street candlesticks charts and financial reports of accounting. (Common Stocks & Uncommon Profits)

If you ask customers and suppliers, you get the truth of the company.

Scuttlebutt technique is very helpful to you to stay away from those companies that have the good on paper but actually not in the real situation, so this types of company stocks get in Ponzi scheme, then they lose the 90-95% stocks value.

So these 15 points help you to define which types of company you found, is outstanding company or Ponzi scheme company. (Common Stocks & Uncommon Profits)

Philip A. Fisher believes in holding stock forever, and ken believes in holding stocks for 5 to 10 years and growth stocks, value stocks, large-cap stocks, small-cap stocks, all types of stocks you can use this method because this method helps you to find out which is a quality company, whatever they company in any industry.

Ken says the Scuttlebutt chapter is about 3 pages but they told this is the best part of the book and very important parts

One of the best questions of Philip A. Fisher is not in this book, key say, ” What are you doing that your competitors aren’t doing yet. “

So that means if the company is not doing anything means they lead the other company in the same industry and other companies follow that company. (Common Stocks & Uncommon Profits)

Ken says, 15 points of company quality and scuttlebutt method is the diamond of this book. so and another topic is also very much important like 10 don’t for investors.

So ken suggests you have to read this book as much as time while you analyze a company.

The second preface is all about the Philip A. fisher family, you can read, buying this book, by click on the image, so let’s

Starts Preface by Philip A. Fisher :

In this preface, the author gives the shorts story of writing this book. Before writing this book, the author runs the investment counseling business at the age of 26, they run this for 10 years, and after that

in 1941 he got a job in the army air force. They work there for 3.5 years. so in this time period, they reviewed their investment actions. So from that review, some good points are born that are different from the financial community analysis rules. (Common Stocks & Uncommon Profits)

After the end war they use these 15 points and they got a good return for 12-13 years, and they want to keep the printed record, so they write this book.

The author says, beyond that 15 principles other two important things matter for investment success.