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How to find growth stocks

June 5, 2021 by Laxman Sonale 2 Comments

Hello friends, in today’s article we see how to find growth stocks from chapter 10 how I go about finding growth stock of book common stocks and uncommon profits. In chapter 10 Philip A. Fisher explains, how they find the growth stocks. so let’s see step by step

Previous Chapter 9

The step-by-step process for find a growth stock:

Philip A. Fisher says finding growth stocks and doing these things take a great deal of Time, Skill, and Alertness.

Philip A. Fisher says, ” This is what it is, there is no easy way to find growth stocks.”

So there are thousands, of stocks in dozens of industries that could qualify as worthy of more intensive study.

How do decide which stocks to investigate further? given these question answers, Philip A. Fisher gives the following points:

a) you can decide stock to investigate further by talking to business executives and scientists. Philip A. Fisher says, ” 20% of ideas and 16% of purchases come from this source of people.

b) You can also decide stock investigate further by talking to able investment men across the country with impressive records. Philip A. Fisher says, ” 80% ideas and 84% purchases come from this source of peoples.

The Authors( Philip A. Fisher) looks for some key matters while talking to these people in order to decide whether to investigate further or not.

for example any company

Is this company being steered towards the line of business having opportunities for unusual growth in sales?
would it be easy for newcomers to enter these business lines and displace leading units?

If sales growth easily growing and new companies easily not enter this business line.

Then the author ( Philip A. Fisher) investigate further this company. If this company is not true on the above question then the author rejects that company. (How to find growth stocks)

When Mohnish Pabrai meets charlie Munger then charlie says, to successful investing you have to see what able investor doing and what to buy and then you can investigate further of that stocks. the same author also does before this great investor.

from this your work is simple and then you can not have to investigate 1000 of the company for one idea and this is not easy to investigate 1000 of the company. so use this method.

The Author decides by talking about these two types of people, which the company has to investigate. after this author gives

What to Do Next:-How to find growth stocks

After deciding which companies to investigate further, the next step is following:

A) What The author doesn’t do this:

The author doesn’t approach management at this stage.
He doesn’t go over part annual reports for hours and hours and making minute studies of minor year-by-year changes in the balance sheet of the compnay.
The author doesn’t ask every broker about the broker’s opinion on the stock of the company.

So what to do author give below:

B) What The author does do this:

The author does a Glance over the balance sheet to determine the general nature of capitalization structure and financial position.
And they also Read SEC prospects for the breakdown of sales by product lines, competition degree of promoter ownership, profits margins, the extent of research activity, the abnormal or non-recurring cost in prior year operations. (How to find growth stocks)

Then the author uses the scuttlebutt method as best as he can use this method.

In this, The author meets every key customer and supplier, competitors, ex-employee, and scientists to find answers to the 15 points.

the author meets him with common friends and if they can’t meet them, then they reject the company.

If you want to meet these key people so don’t meet general call or direct meeting, for this purpose you have to call them officially and assure them their name never come anywhere, then you get 15 points solutions.

Some people think, how management meet me, so for author says,” Management doesn’t see how much you can invest in a company, they only see the how much confidence you have about this stocks.”

after meetings key peoples then the author gives what to do next as following:

What Next:

Then author approaches the management to fill the gaps in 15 points they get information from the key peoples.

The author says, ” Scuttlebutt method helps to you know the strengths and weakness of a company, so you can ask to meet specific officers of the company.”

For example, if Scuttlebutt’s method tells you there is some trouble in the marketing division, you can ask to meet people from the marketing division to find out whether they are doing something to improve the situation or not.

the author gives advice to us, say ” never meet the management of any company until you have first gathered together at least 50% of all the knowledge you need to make the investment.

The amount of time management will give you depends on the company is an estimate of your competence than the size of your financial interest. (How to find growth stocks)

It is wise to be introduced to management by the right people.

The companies considered as idea bought from 250 ideas, then choose one
Those companies investigated actually bought from 40 to 50 ideas, then choose one.
the companies visited to meet management actually bought from 2 to 2.5 idea, then choose one

This is because the Scuttlebutt method gives a completely accurate picture of a company on 15 points. If the author decides to meet the mangement. so there is a high chance is to buy that stocks.

from the above deep process, the author choose the company or find the growth stocks

In the shot above process, I make the summary process format of finding growth stocks

Summary of Process:-

20% of ideas come from friends who are business executives and scientists, and 80% of ideas come from a small number of able investment men.
Brief scrutiny of few point in SEC prospectus, scuttlebutt method aggressively for 15 points.
Contact the management only in occasional cases when 15 points are qualified by the company reasonably.
If hopes confirmed as fear cases after meetings with the management, then buy that stocks. (How to find growth stocks)

Now people ask others and say’,” How can someone be expected to spend so much time finding just one investment.”

So answering these questions the author give, ” In what other line of activity, you put $ 10,000 in one year and then years later it becomes $ 40,000 to $ 150,000.”

So reading this you get the mindset of following Philip A. Fisher’s method of finding growth stocks.

So this is all about chapter 10 of the common stocks and uncommon profits book.

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.