common stocks and uncommon profits epub

Common Stocks and Uncommon Profits book review

June 6, 2021 by Laxman Sonale 3 Comments

Hello friends, In today’s article we see chapter 11 of the common stocks and uncommon profits book review. chapter 11 is about the summary and conclusion of common stocks and uncommon profits book review. So let’s start summaries the whole book in simple words.

Previous Chapter 10

Summary and conclusion:-common stocks and uncommon profits book review

In chapter 11 The author explains the whole book in a simple format or we say summary and conclusion. so let’s start with them.

This book has attempted to show

What are the basic principles of Common Stocks investment: In this author explain which point we have to consider while coming to common stocks and also explain how people make money while using the two techniques in past, and we know in the stocks market we can make a tonne of money just finding the outstanding company.
What type of stock to buy: In this point, the author explains the outstanding company stocks. How to find them, while using the Scuttlebutt method and applying the 15 points of principles of outstanding company. So this type of stocks we have to buy. (common stocks and uncommon profits book review)
When to buy it: When you find out the outstanding company, then there is some time we have to buy while seeing the scenario of buying principles, this point explains in the whole format, you can see it by click here.
When to Sell it (Never): In this point, the author explains the philosophy of selling stocks, and why you have to sell stocks when you required very much emergency, but if there is no emergency then don’t sell stocks. The author explains the Never sell stocks ever philosophy and behind that reason. you can see in detail click here.

The author says, ” if you don’t have patience and self-disciple, so you can not do anything good in the stock market while knowing all this above method strategy.

In the stocks market, having the mind or cleaver ness is not sufficient to do good in the stocks market, you have to right mindset then you do better than those people who say themselves professional.

Shakespeare unintentionally summarized the process of successful common stocks investment: ” There’s a tide in the affairs of men, which taken at the flood, leads on to fortune.”

It means, to grab opportunities whenever they arise before you lose them by delaying.

Doing this can make you a fortune.

This is all about chapter 11: summary and Conclusion.

I hope you love this book summary of all chapters that explain.

how to invest in the stock market for beginners

June 4, 2021 by Laxman Sonale 1 Comment

Hello friends, in today’s article we see chapter 9 of the common stocks and uncommon profits book. In chapter 9 Philip A. Fisher explains the five more don’t for investors, that helps people for how to invest in the stock market for beginners. If you know what to avoid then you know what is have to do, this is called a rule of inversion. so let’s see five more don’t for investors from chapter 9 of common stocks and uncommon profits book that helps you how to invest in the stocks market for beginners.

Previous Chapter 8

Five More Don’t for investors: how to invest in the stock market for beginners

1) Don’t Overstress diversification:-how to invest in the stock market for beginners

In the financial community more speak bad habit of concentration than the bad side of diversification.

Without knowing the company buying its stocks because you want to do diversification, this is more dangerous than the concentration in one stock.

Some company’s business lines, not some so this is also a diversification, author says, “I can not give specific rules for this, but I can give you some rough guidance.”

a) All investments might be confined solely to large companies, minimum of five stocks to be elected i.e. 20 % in one stock on an average, and attention on this company may be overtopped this company.

b) You can some or all money can be put in mid-cap companies if only mid-cap companies are involved, minimum often stocks i.e. 10% in each on an average those with greater inherent risk maybe 8% return of our funds. (how to invest in the stock market for beginners)

c) Small companies having possibilities of gain if successful but complete loss if unsuccessful, so you have to remember this. for these rules to follow

Only put those funds into them that you can afford to lose.
Don’t put more than 5% of funds into any one such company.

Category c) type company, it may be failing or go big or come to category b).

if the company is big, then your investment value also big from 5%.

So this company goes in category two then you can’t put 8% to 10% in this company.

In this c) category authors give advice on minimum stocks for diversification if you put more stocks in your portfolio then you can’t track all of them at the same time.

So practically investor knows more attractive company finding is not easy and track all companies also difficult.

2) Don’t be afraid of buying on a war scare:

Every time a major war breaks out or even on the fear of war, the market plunges sharply.

By the end of the war, stocks have always gone much higher.

In wartime, the government spends more than it earns, fiscal deficit increases, borrows money, increases the amount of money is the system causing inflation. (how to invest in the stock market for beginners)

In such a situation, having surplus cash becomes the least desirables.

Buy slowly at a scale down on a threat of war.

If war occurs, increase the tempo of buying.

Buy into companies with products and services they demand which will continue in wartime or those facilities can be converted into wartime operations.

If research effort spends on narrow-margin defense projects could be channeled to normal peace-time lines, shareholders’ profits would be greater.

3) Don’t be influenced by what doesn’t matter:

There are certain superficial financial stat superficial statistics that are frequently given underserved of attention by many investors. (how to invest in the stock market for beginners)

The author says there are some points people give the much attention to then required.

1 ) Prince range at which a stock has sold in past years:

Most investors see the price of stocks in 5 to 10 years, they see the highest and lowest price and from his,

they decide in mind this is the good price I have to buy, and the price of that stocks come and they buy on that price.

for this author give advice and says today’s stock price has no relation with what price of the stock before four years because before 5 years the view of investor for the company is different than now for companies perspective.

Investors think and buy on only if that stock price again goes to the highest level and we make money.

2) Heavyweight is given to EPS of the Past 5 years of the company:

What happened in the previous five is less important than what happens in the next five years.

Like new product come in the market and new plant develop by company, that help to grow.

for this understanding author give one simple example,

e.g. Texas instruments looked expensive in seeing past earnings, the company comes with a new product, and in six years company gains the 1000% return.

3) Whatever has happened for a number of years is bound to continue indefinitely:

for example, the EPS and stock price rising form five years and from now again five years is increasing.

But research timing and expense are uncertain that’s why outstanding companies’ profit also go minimum in for 1 to 3 years. (how to invest in the stock market for beginners)

The author says it is not to ignore all of these, you have to see this but don’t give maximum value than they deserve.

4) Don’t fail to consider time as well as price in buying true growth stocks:

A company qualifies on the 15 points, a strong indication that earnings are going to increase for the next several years.

So stocks are bought but at intrinsic value is $20 but current stocks price is $32.

We think stocks are going up to $75 in the next to a given year, so the conservating investor doesn’t buy that stocks did not come up to $20 or some close to $20.

The author suggests, instead of this, we have to see stocks low price point when coming

maybe the low price of company stocks averaged about one month before the pilot-plant stage.

So why not plan to buy this company’s share 5 months from now, which will be one month before the pilot plant goes on stream. (how to invest in the stock market for beginners)

Why you buying stock price can go down, but they can go down while buying on $20. This method will bring you stock at near the lowest price at which the stocks will sell from that time on.

5) Don’t follow the crowd:

The stock price of a company may rise or fall based on the influence like change in net income, management, tax lows, and new invention.

All these occur are real in the world.

Another type of price influence is one that is purely psychological. nothing has changed the outside world at all.

The majority of the financial Community looks upon the same circumstances from a different viewpoint than before.

These shifts in view are not confined to stocks as a whole but particular industries and particular companies within those industries as well.

These are fads in the stock market. these fads may be run for months or years, but in the long run, realities terminate them.

Remember one thing. the financial community is usually shown to recognization a fundamentally changed condition unless a big name or a colorful signal event is publically associated with that change.

this is all about chapter 9 of common stocks and uncommon profits book, which helps how to invest in the stock market for beginners.

When to sell stocks

May 8, 2021 by Laxman Sonale 1 Comment

Hello friends, in today’s article we see when to sell stocks from chapter 6 of the common stocks and uncommon profits book. This chapter helps you to understand the selling of outstanding company stocks. The most important question is: when to sell stocks? so let’s see their merit and demerit of selling stocks.

When to sell stocks:

The author says ” if you are selling stocks, then we have an infinite reason for that for example, selling stocks for child education, starting own business and buying own house.”

This above all reason is out of this book. The author is only focusing on those reasons that have only one purpose making maximum profits by selling stocks.

If you are buying stocks on the basis of the previous chapter. Then you have only three reasons for selling stocks.

1 ) The mistake has been made in the Original purchase time:

You have made the mistake while buying stocks that are known from the facts of the company. Now this time the prospect of the company is not good as before buying time. So in this situation, you have to control your emotion.
You have to remember this, ” big investors also do big mistakes”, so sell stocks as quickly as.
don’t hold that stocks for the long term, while listening to your ego. In this situation say no to that stocks and don’t run from accepting mistakes. so most of the investors lose their money while listening to their ego and holding that stocks. (When to sell stocks)
In this situation, you have two types of losing
1) the more you hold, the more you lose: Instead of that sell these stocks and buying the better stocks then these stocks hold for the long term so this stock’s profit is more than the previous stocks we hold for the long term.
2) Profits have also gone: If you hold those stocks then you lose the profit of better stocks also.
If you really want a 100% gain on the investment of your lifetime saving, over a period of the year, then don’t think of a 10% loss or 5% gain. don’t lose energy while thinking of that loss and gain.
Review your mistake carefully, learn from that mistake, and go forward.
In my opinion, Those investors buy the stocks, while analyzing them properly, and after some time those stocks go bad. They going bad they have the fact of that happening and show the reason for that happening.
But investors never believe in that fact, because they are very much attached to that stock like attached to a girlfriend. (When to sell stocks)
So Those are a trader, these people are not attached to stocks whatever stocks. they only put the Stop Loss option. If they had made a mistake, then they don’t lose lots of money because of the stop loss option and they play other trades. I am not saying to become a trader and put the stock loose. I am saying that taking the quality from traders is detachment from stocks. and learn this skill of detachment.

2) If the company no longer qualifies in regards to the 15 points.

This situation has two reasons for this cause of selling stocks

A) Determination of Management:

Management of the company is long after time getting success. And they are sufficient with that success and after that, they don’t work like before they do to got success.
The new management of the company does not believe in the old management policy. The Old management policy helped to get the success of the company. (When to sell stocks)
In this situation, you have to sell stocks as quickly as, whatever the general market outlook. If the market is bullish or bearish what is the capital gain TAX?

B) Company no longer has the prospects of new market and new products:

If the above point is taken, then that is why the growth potential of the company decreases,s and then the stock price is also decreased.
So in this situation, you can sell these stocks slowly, but you have to consider, the time of selling stocks comes.
Stocks can be sold at more leisure than management deterioration, but the time to sell has come.

3) Switching to more attractive company stocks:

If an investor is very much sure about other stocks are better than these stocks in growth prospects.
then after that, you can switch whatever capital gain tax is applicable while selling these stocks. you can handsomely switch to better stocks.
So this that not mean switching each and every day and becoming a trader.

Above these three reasons from the author, the author gives another reason for selling stocks according to the financial institute, consider to sell stocks and their thought and the authors thought on their thinking.

so let’s see financial community’s reason for selling stocks is good or bad

Reasons the financial community gives for selling stocks:

1) General Market decline is on the horizon:

The general market forecast is only a guess, you have to find out the real problem in the company and get the knowledge that does not depend on a guess. (When to sell stocks)
If you sell stocks and the bear market does not come, then you got a loss and when investors buy stocks and capital gain tax is also applied. this looks like pure stupidity.

2) Outstanding stock has become overpriced:

Overpriced means the P/E ratio of the company is more than the investor thinks this range is a good P/E ratio. This P/E ratio is more multiple than the P/E ratio, which we are considering is good. This can get while considering with other company.
No one tells you the good price of the P/E ratio.
In any common think good stocks of the company will sell and should sell at a higher P/E multiple.
The author says, ” if you understand the stocks is go high as compared to its a fundamental value and 35% can fall down but have a good prospect of the company. then You have to maintain the position in that stock and not sell at all. (When to sell stocks)

3) Most ridiculous of all is that Stocks has had a huge advance:

This stock’s potential is gone and buying the new stocks and saying these stocks do not go high.
The author explains with examples, ” Suppose you have the last day of your college life. Everyone asks you to give them 10X of their first-year earnings.
instead of that, they give you 25% of his every year earnings for the rest of his life. so you don’t have that much money to give each and every classmate in your class.
You can give only three classmates. In this situation you can’t see who your friends are, you directly see which student in the class is clever and those got big earnings in the coming future year.
You choose three people, and after 10 years, one of your classmates, get outstanding success. He gets promotion on promotion and gets the top executive post in his company.
So the author says, tell me in this situation, you can sell me a contract of those friends that got great success,
because only one reason is that they get the 600% return on your investment and buy those classmate contract that has the same earnings before 10 years and after also.
You think like this, a classmate does not develop and has the ability to develop. this is like the above third reason for the financial community. (When to sell stocks)
Now you say, a college classmate and company stocks are both different things.
the author says, yes one big difference is, our outstanding classmate gets possible death early is not but, he will die one day, definitely.
After his death, we don’t get 25% of his earnings.
But a company doesn’t have a lifespan whatever death of the founder has happened, the company is still running, generation after generation.
Those quality and management policy is the same and they are hiring new quality management.
For this the author says, this whole chapter in one is

“If the job has been correctly done when stock is purchased, the time to sell it – Almost Never..”

This is all about when to sell stocks from chapter 6 of common stocks and uncommon profits book

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When to buy stocks of outstanding company

April 17, 2021 by Laxman Sonale 7 Comments

Hello friends, in today’s article we see when to buy stocks from common stocks and uncommon profits book. this chapter helps you to when to buy stocks of outstanding company. If you buy the stocks at right time then only then you make the maximum money, so that’s why buying time is very much important.

Previous Chapter 4

When to buy stocks:

Up to here, we know that how to make money in the stock market. the best way to make money in the stock market is to invest in an outstanding company. The outstanding company is found by Scuttlebutt Method and 15 points of outstanding company.

Now you found an outstanding company, and that have a good profits margin and have good growth in the future. So the question is here, which is a good time for this outstanding company to invest.

The author says, ” buying a right company and hold for the long term, then you get some profits in every time.”

But you need maximum profits, then you have to think some points and buy on right time stocks.

you have done the most difficult part, is finding an outstanding company, now give some more effort to time the outstanding company stocks. then you have to learn some principles of buying right time stocks.

The author says, ” If you buy outstanding company stocks before 1929, stocks market crash, then after 25 years form buying, you only get little profits. So there is buying stocks at right time is the most important thing.

Timing an outstanding company, the normal method is to collect lots of economic data and apply then and analyze general business forecast and see a good situation or bad situation of an outstanding company.

the author says, ” This looks good method but practically is not good because forecast result is not good for taking risk of life time-saving.”

The right way is to understand the growth stocks’ nature, then you get good stocks. An outstanding company is those are they stay forward in Industry and work on developing a new product by using new process techniques. So doing this company gets lots of expense and some years get minimum profits.

here, the author tries to say that to understand the cycle of business and their product, like some news is an outstanding company is doing some good product and then the price is going high of that stocks. And again news comes, the plant is operating successfully, then also stocks prices go high.

But when difficulties are coming then the operating cost of that plant is going high and profits going down, so people sell as fast as they buy those stocks, then stocks price is going down.

And finally plant is running smoothly, and a two-day going rally on stock prices, but in the next quarter sales and promotion cost minimizes the profits, and now news spread is management has blundered with the company, and stock prices are going low up to least years stocks price.

So this is the best time to buy in this company.

Once the extra sales efforts make the first plant to pay normal sales effort enough for the upcoming year to establish another plant for the company.

So now company know the difficulties of running smoothly plant so 2 to 5 plant running smoothly and it is easy to establish.

that time 5th plant is run an full speed that time company is very big, for to develop new cycle product without profits or stocks price fall.

let’s see the examples of three companies

1.Americal Cyanamid:

These company stocks are compared to other company stocks, trade-in low multiple of P/E.

So new management is come and doing cost-cutting with efficiently to run efficient and spend money of new plant with complex engineering and plant does not work on schedule, so this time is good to buy this company stocks.

In five years this company earnings increased by 70% and stocks returned 163% in their price. but the author sells this company stocks at 110% return on stock prices. Because other companies long-range outlook is better than this company and company chemical business is not improved as compared to other companies and company is trying to enter in the highly competitive textile business.

Which time is good to sell see in next chapter 6

The author says, his decision is good or bad also is only knows the future.

2.Food Machinery and chemical corporation

This Company in world war II, before that they make the different machinery for different business, but in world war II, they making guns, rifles,barud, etc.

This company is going in the chemical business and maintaining the cyclical tendency of the machinery business, and separate companies are acquired and no one interested to buy this company stocks, so this is right to buy this company stocks.

So Top management is ready to hiring other peoples and promoting internal employees. and also doing to fix the old plant problem and run them a better way. Incurred abnormal expenses for 1995 to 1957.

Finally chemical business runs good and profit increases and the P/E multiple is also improved. In some years this company gets a 102% gain in stock prices.

3.Company well-known for its excellent labor relations:

In this company the size is growing at which friction happened and the relation is going bad and one new product also fails, that’s why EPS and stocks prices are going down.

So this point 1, their stock is good for buying.

After that management made plans to correct this situation quickly. After some time another strike happens and the stocks prices again go down.

So this is point 2 when stock is good to buy.

If you buy the stock at point A, get the profits are up to 90% and if you buy stocks at point 2, you get 50% profits.

The authors say’s, ” there is not necessary to have a problem in a company and saying that time is good opportunity to buy.”

So there is another situation also, for example, A new plant expense is up to 10 million dollars.

When the plant is operating at full speed, an engineer checks that plant and they found some problem in that, and this problem is fixed by making a 1.5 million dollar expense i.e 15% more capital to increase output by 40%.

So no additional overhead because the plant is already in operation so the profit margin will increases.

So from this example, the common things are that the EPS is improved in coming years, but this increased price has not yet produced on upward more in the price of that company share.

Whenever this type of condition is coming, then that time is good to buy, and stocks are in buying range. if this situation is not then investors also make money in the long term by buying outstanding company but profit is little.

Suppose investors find out the outstanding company that is good on 15th points and a good time is also come to buy. Suppose in the company there are some temporary issues is going what investor do then do invest in all money in that stocks by ignoring the business cycle?

If you buy stock and depression is coming and 40 to 50% of the stock falls from your buying peak.

So in this situation happen two case

Suppose investors already have some fairly substantial gains, from their previous investments, so this investor can ignore this problem in stocks and guesses of the business cycle and quickly invest by provided not craziness like 1928-29. so this has two advantages of doing this: a) investor is making be on somethings he knows, rather than something which is largely a guess. The company business is improved by talking to people but the business cycle forecast is only a guess, or if the market is down if they invest in that company. b) company is about have an increase in earning so these stocks fall less than other.
In this second case, the investor doesn’t have substantial gains from previous investments or is new to this game. this type of investor can buy appropriate investment asap and stagger the timing of further buying and allow several years still final part of funds are invested. This has some advantage of a) If the market does not decline, then they have good profits from that investment and become the case-1 investor. B) If the market decline during this period, the investor still has funds to take advantage of the decline and use it to buy other stocks. c)If a market decline happens, after the final part of your funds of investment, the gains on earlier purchases would largely offset the decline on more recent ones.

From the all above reason to invest all money, instead that invest slowly for several years is better.

Read More: One Up On Wall Street book

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.

Value investing website

15 points of outstanding company

April 2, 2021 by Laxman Sonale 3 Comments

Hello friends, In today’s article we see 15 points of the outstanding company from chapter 3 of the common stocks and uncommon profits book. In 15 points of an outstanding company, you have to apply for each and every company to show the outstanding company. Philip A. Fisher gives these 15th points from his investment strategy they use for 10 years, with getting a good return.

previous chapter 2:

Chapter 3: What to buy: The 15 points of an outstanding company

In this chapter, we have to talk to customers, suppliers, management, and competitor about the company, by asking about these 15 points of outstanding company.

These 15 points define whether the company is outstanding or not. so let’s start with the first points

Does the company have products and services with the sufficient market potential to make possible a sizable increase in sales for at least several years?

The author says, ” if sales are constant or decline, then also you make the one-time profits from that company.”

A company can minimize costs and improve profits so that is why the cost price also increases, so in this company, investors can’t make the big money. (15 points of the outstanding company)

In other situations, profit can be big while the change in the industry, for example, If one company makes the first radio as a product, but now they are making Television and sales are increasing and that’s why profits also increase, but it has limited up to the time when everyone has the T.V., then profits is stopping and growth of sales also stops. so this is a type of situation that is also a one-time profit, but better than the first situation.

The author says, ” Sales do not grow like a uniform, they grow like irregular form, so don’t see the sales of annual reports or one year, see them for several years. (15 points of the outstanding company)

We need that type of company, they have the following two characteristics

1) Fortunate and able: (example: An aluminum company in America)

2) Fortunate because they are able: (example: Du Pont )

@ Aluminium Company of America is fortunate and able, because companies founder do the commercial and show the use of aluminum in daily routine, and they got a bigger market for their product, whatever they expect, this market is bigger than their thought. And they also take the advantage of fortunate scenarios.
Company stocks of the aluminum company of America his stocks increase 6 times their continuous previous year of medium return, which goes up to 40% down, and they become the 6 times. (15 points of the outstanding company)

@ Du Pont: This company makes the blasting powder for lots of the year, but in peach time, their sales come down, and close to the mining industry level. So in making blasting powder company develops the skill and this skill is very useful for making new products, and they launch one after one, and each product sells quickly and they make themselves a fortune.

So both types of companies have one thing that is important is that the management ability is the highest order, so without them, this sale not stay for a long period of time.

If any amateur investor invests in a chemical industry company and they see the talk like, ” in the industry those company is more attractive that have, their develop good growth product.” So they say’s the wrong way

Because of that the company is developing attractive growth products, that why they become an outstanding company. (15 points of the outstanding company)

if any company management is outstanding, the industry is in a change of technology, and the company has more focus on research, so the investor has to be alert about how management take the advantage of that opportunity to increase their sales and profits.

The Author say’s, ” His friends, make a survey in 1947, of the television industry and they found the competition is going to be very competitive and in between that there is the shortage of glass bulbs for picture tubes in T.V.

So Corning Glass Works company has the technology and research ability to supply the glass bulb to the T.V. Industry, so opportunity becomes the new revenue source for the company. (15 points of the outstanding company)

So author’s friends, recommend stocks, and these stocks in increase 12 to 13 times in just 10 years.

so let’s 2nd points

2. Does the management have the determination to continue to develop products or processes that will still further increase total sales potential when the growth potential of currently attractive product lines has largely been exploited?

you see the first and second points have a difference that the 1st point says, companies have to be existing product market is large so for that in upcoming year sales is increasing.

So 2nd point says, ” what is the company realize or not when the market potential of the product ends.”

if they want to grow continuously, so they want to work on new products and new markets.

So those company has come true on the first point and 2nd point also, then we need this type of company. (15 points of the outstanding company)

if the company doesn’t have there plan and policy for developing a new product, this company gives you only on-time profits, up to that time the existing product has market potential.

Scientific research and development is the first focus of the company because they develop an old product that is good and develop new products also.

Those company tries to develop new products from the existing product line, this company is doing better than those company that develops unrelated product. If the unrelated product is successful so company occurred in a different new industry, so that has no link with its existing industry. (15 points of the outstanding company)

let’s start with 3rd point

3)How effective are the company’s R & D efforts in relation to its sizes?

If you divide R & D expenses into the annual sales, so you get how much a company spends a dollar sale of percentage on R & D, which means how much percentage they give to the R & D expense of total money.

You can compare this figure with the other company. but it’s misleading if one of the companies is doing an existing product to take the order and customize it and they show research expense, but not many people believe that this is R & D expense. (15 points of the outstanding company)

Other companies do for new product palate plant cost as production expenses or not show R & D expenses. So both situation figure is not comparable.

A research scientist is well-skilled, and the company has that expertise, in that other expert scientists work together in a team.

Research experts and product sales are both familiar with the problem or not. we have to find out this. if they are familiar then profits increase.

The research and production department has to be in close relation, then good and quality products will be developed.

So the Top management crash program increases the research cost. crash program those, in that research people work for those workers that is more important, in this time.

Most of the time crash program is not worth all these disruptions they cause.

So in a big company, they have a maximum problem, that is why the small company is not afraid of the big company for competition.

So many times government pressurize to do research, and companies also do research on defense research.

Defense research-related product information is how much benefits the investor. let’s see three situations.

The new weapon doesn’t have commercial use, but only work for military purpose and weapons write have government, in they can make a weapon from any other company by giving weapon writes and they develop the competition between the company and get from the cheaper company, that develop this product, so other company builds the product. so in this situation, investors have zero value for this crash program.
second, some weapon is developed through a very critically complex process, but manufacturers have learned it and develop also more difficult than this, time other companies try to develop a weapon, they face a problem, so the government has to come to those company that develops first, so there is not a competition between the company, so in this situation, they have some value to the investor. (15 points of the outstanding company)
As a like weapon, while the research team developing a weapon, they learn the new technique and principles that use in a commercial product of the company and improve it, and that is why the profits margin is increasing, then this type of crash program is most helpful to the company and in this situation investor has the great value.

so from government money, companies’ research teams learn the new principle and techniques, that apply to commercialize their business models, this is the reason for Texas Instruments and Ampex company success.

Market research is the important part, you have to see what the company is doing or not. If doing, so how big is the market, and what actually the customer need? Without doing market research, if a company develops the best product, that has zero value, they will be going zero or even cost also not make.

And also check company is spending money on research how long, you have to see for 10 years. To make a new product to develop for the sales and profit rate increases. (15 points of the outstanding company)

let’s see the 4th point of outstanding company.

4) Does the company have an above-average sales organization?

Making repeat sales from the old customer is the first benchmark of the success of the company.

Most of the Investor’s focus is minimum on the sales efficiency, advertising, and distribution organization of the company. and maximum focus on product research finance etc.

Competitors and customers tell you the sales and marketing organization of the company.

Outstanding sales, product, and research three are extremely important for the company’s success.

For example, Dow Chemical Company: This company is very famous for outstanding research but people don’t know about their salesperson. The company is taking care of scientists as well as salespeople and give both special training and give some attention to salesman like research scientist. (15 points of the outstanding company)

Another example, IBM company: In this company salesman is spending 1/3 time of his job is on training. If any company’s sales organization is not strong but they have good at research and product, this like company gives you only time profits.

let’s see the 5th point of an outstanding company

5) Does the company have a worthwhile profit margin?

From an investor’s point of view is that if sales value is when only if profit growth increases so without profit, sales growth is useless.

Industry profit margins and companies’ profit margins compare each other and we have to invest in those companies that have a maximum profit margin.

Marginal companies, those companies that have minimum margin, we don’t have to invest in that, you can only invest when companies business is changing fundamentally, and that causes profit increases and this profit is compulsory, so this company is leaving the marginal company category. (15 points of the outstanding company)

If big companies’ profit margin is minimum so maybe happen if this is temporary. so maybe happen their profit they use for research and sales promotion for some time. So this situation is more attractive.

If all industry is doing well, so all companies’ margin is maximum and in marginal companies, the profit margin is more percentage increase, and that is why profit growth is maximum compared to those companies that profit margin is maximum.

So after some time or in bad time come the marginal companies’ profit margin falls down very fast.

let’s see 6th points of outstanding companies

6) What is the company doing to maintain or improve profit margin?

The Company’s success does not depend on how much margin at buying time they depend on, or what profit margin in the future. (15 points of the outstanding company)

Wages and salary costs increase year by year also cost increases as Raw material and supply costs. Some companies increase product prices to maintain the cost of wages and raw materials. Because they have the demand of that product or competitor increases product price more than that price, but it is the temporary company seeing the demand company increases the production capacity and demand is not like that then margin in minimum.

Some companies smartly minimize costs, like accounting and book handling, and transportation costs.

From this smartly we can minimize cost or cost-cutting, so this is not happening in one right way. So the investor has to focus on what the company does for cost-cutting and margin improvement, and this confirms by talking to the top executives.

So those companies doing good at cost-cutting they will do in the future also.

6) Does the company have outstanding labor and personal relations?

If regular strikes happen in the company and carry on for a long time, then this affects on badly on production department.

If those companies have a Labor turnover maximum, then avoid this company because training new employees that increase the cost.

Those companies have no labor union, they usually have good relationships if the union is present but have mutual respect with management. If strikes do not happen in a company, it does not mean relation is good.

Companies’ labor turnover is relative to the company of some industry or in some area, so their relationship is how much good is important.

If the company is doing mass hiring and mass firing, so this is not a good sign from the company or investor’s point of view also. (15 points of the outstanding company)

Those companies are good companies, they settle grievances quickly and make above-average profits and above-average salaries paid to the employees, and applicants have a maximum list in that company to take the job.

If companies profit is coming by paying below-average salaries, means a serious problem is coming soon in the company.

8) Does the company have outstanding executive relations?

executives give the right direction to the company and they have a big responsibility and they have maximum stress level.

top-level executives’ stay in the company is mandatory and stay gives the maximum to the company, so these types of relationships are present in the company.

The company has a like culture, in that promotion is given on an abilities basis, not favoritism or not on nepotism. (15 points of the outstanding company)

The salary industry is that much from outsider selection when inside people are not capable of the post. An investor can learn about it easily by chatting with a few executives scattered at different levels of responsibility

9) Does the company have a depth to its management?

This means the company can delight in responsibility and authority. That means not like a one-man army

A small company can do better in one-man leadership, but sometimes one turn comes like the size of a company is not small and one-man leadership can’t handle all company.

So we learn from the 8th point that is necessary to know about to develop the management dept. means have to believe in the junior also. (15 points of the outstanding company)

The senior executives have to give some adequate authority to the junior for completing work if they don’t do that, if they are absent then the company faces two many problems.

Management has to listen to employee suggestions by giving up his ego, so whatever it be that may be criticism of current management policy.

Read more: one up on wall street book summary

10) How good are the company’s cost analysis and accounting controls?

If a company can not break down its overall cost with sufficient accuracy and detail, to show the cost of each small step in its operation then it won’t have outstanding success for a long period of time.

If management doesn’t figure out the how much cost of the product, they can’t decide on the right pricing. if you ask the management, they will give you detail of the balance sheet, but not have important detail, but have detail inaccuracy. (15 points of the outstanding company)

But investors don’t verify numbers on their own.

If company management understands the cost analysis and control and others they have above average, then in this field they also are above average.

11) Are there other aspects of the business somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?

In short, the company has some competitive advantage. for example in a retail business, need real estate expertise important. if any company can take better leasing property than the other competition means, they have this competitive advantage.

So in this company insurance costs is an important factor, if any company has insurance costs less than 35% of other competitors so this is the competitive advantage of the company.

If any company has some process of patent and product means they have this competitive advantage, but if the company is dependent on the patent for maintaining a profit margin, so this is a weakness because patents have an expiry date and they will expire. (15 points of the outstanding company)

A durable competitive advantage needs to beat the competitor. Manufacturing knows about the sales and service organization and customer goodwill is more important.

So patents are important for small and young companies, if not then big company copy their product and sell them on the big distribution network.

Leadership in engineering is the fundamental source of protection instead of the patent.

12) Does the company have a short-range or long-range outlook in regard to profits?

Some companies do business-like, they need profits today and some companies do not focus on today’s profits instead of that they focus on goodwill, because in long term, over the year, have maximum profits.

The company has treated customers and suppliers, in a form that we know, for example, if suppliers take an unexpected expense to deliver the product, and the company pays the supplier maximum than the contract so this company thinking in the long term. (15 points of the outstanding company)

If a company works to satisfy the customer to take special effects challenge, so they fix and compulsory customer, and they sacrifice short-term profit and think in long-term get overall maximum profits.

Investors have to buy a long-term range outlook.

13) In the foreseeable future will the growth of the company require sufficient equity financing so that a large number of shares then outstanding will largely cancel the existing shareholder’s benefits from this anticipated growth?

means, In a company when growth happens in the future, that company has to issue equity, and because of this, those growth benefits have to the existing shareholder not getting in.

The author says typical investment books most of the space given to this discussion is what is the capital structure.

So these things did not deserve these points. In the author’s opinion, the intelligent investor does not buy only stocks(15 points of the outstanding company) because they are cheap. ( opposite to the benjamin graham philosophy)

The Author says, very less company is only that come true on the 14th point and that companies we need this company easily get debt and easy to raise equity.

If investors think, companies’ growth visualize in the future, and companies’ cash and debt up to a limit of prudence have happened then is good.

After that company issues the equity for further growth, At that time the profit increases and the stock price also, but not sufficient cash and borrowing for growth, as we visualize, so this dilutes the earnings of the current share and we have to find out how much is dilution or after dilution is also attractive.

If the company is true on the 14th point but not good on this point then the investor can be bought, providing companies management if not poor. (15 points of the outstanding company)

If another company is good for financial in cash position but not good on other 14th points then do not buy, just because they are easy.

14) Does the management talk freely to investors about its affairs when things are going well but calm up when troubles and disappointment occur?

Even the best-run companies face unexpected difficulties, become it is the nature of business(lose money on research and profits pause)

But management has to be read by with plan, and how they escape from this situation. if they stop talking means, they don’t have a plan, to escape from the situation

So this investor has to stay away from those who hide the bad news from the investor.

last points, let’ see

15) Does the company have a management of unquestionable integrity?

Companies management is very close to the companies asset, and this asset can have been a different method to use badly.

For personal use companies’ assets can be used and give the contract of the supplier to the relatives.

Give relatives maximum salary, for them, they can issues stocks option. (15 points of the outstanding company)

So stay away from this is only one way is, our investment gives only good management, that limit.

If a company is good on 14th points but not good on this, then don’t put money on this company.

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.