common stocks and uncommon profits wiki

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 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.

Common Stocks and Uncommon Profits book

May 28, 2021 by Laxman Sonale Leave a Comment

Hello friends, in today’s article we see chapter 8 of common stocks and uncommon profits books summary. In this chapter, the author explains the Five Don’t for Investors. This is an important chapter for investors from common stocks and uncommon profits book.

Five don’t for Investor:-Common Stocks and Uncommon Profits book

This chapter explains the five things investor must have to avoid this help you to avoid big losses by using common sense behavior.

1) Don’t Buy into Promotional Companies:

Those companies are promotional companies that have just started or about to start are promotional companies

For successful investing, we need to find out companies, that develop new products and processes and exploit new markets.

Promotional companies do this but you have to see any company without at least two years of commercial operation and one year of operating profits in the promotional stage. (Common Stocks and Uncommon Profits book)

Entrepreneurs usually have only one skill many be production and they lack marketing skills or superb salesman who lack other skills like production or product quality.

Promotional Companies can give some work to others to perform well, finance is done by other investment funds or special groups that have the capability to do deals with weakness of companies’ entrepreneurs (high-level businessman quality talent).

Leave this investment for investment or finance specialized groups means promotional companies leave for these people.

2) Don’t ignore a good stock just because it is traded over the counter ( not in the stocks exchange list):

Don’t ignore outstanding company stocks because just, they don’t trade on exchange those stocks traded on the exchange, which have maximum liquidity and are marketable. (Common Stocks and Uncommon Profits book)

But broker has the network to buy those stocks that are not traded on the exchange to buy and sell stocks those not on the exchange.

From this, those stocks get the liquidity and marketability of unlisted stocks.

Author Says, Buying and selling unlisted stocks from a broker, before that, you have to choose brokers, like that you choose doctor and lawyer.

Unlisted outstanding stocks’ liquidity is more than those stocks, that are exchanged in small regional stock exchanges.

If a company is outstanding so its buyers are maximum whatever that company is unlisted or what.

But the company must be outstanding and the broker is honest and able to easily trade that company that is not listed on the stocks exchange. (Common Stocks and Uncommon Profits book)

3) Don’t buy a stock just because you like the tone of its annual reports:

Most investor is often influenced by the wording and comments in the annual report.

This tone may also reflect the skill of the public relations team in creating an impression about the company in the public mind.

If an Annual report fails to give proper information about matters of real significance, such companies don’t provide for successful investment.

4) Don’t assume that the high price at which a stock may be selling in relation to earnings is necessarily ………

…………….an indication that further growth in those earnings has largely been already discounted in the price.

let’s start with examples, If a company name is XYZ, this company in the past 30 years, they grow profits and sales and they qualify the 15 points of outstanding company. (Common Stocks and Uncommon Profits book)

And this company is focused on the new product from that they also grow in future as they grow in past.

Management expects in the next five years the earnings are double.

Stocks are selling at 20-30 times higher form current value, but their current earnings are twice the P/E Ratio of average stocks on DJIA. (Common Stocks and Uncommon Profits book)

let’s start with what people things about this

Those people who think it is overpriced are assuming that 5 years from now the stocks will sell at some multiples of DJIA (Those people things or speak stocks is overpriced,

Those people assume that after five years, the stock’s P/E ratio is half of the current P/E ratio. But past 30 years the P/E ratio is always twice the DJIA why not stay in the future and earnings is double in five years).

If work is not on new product and existing product potential is have to over that time situation is different this time may happen stocks P/E ratio is fall.

But we know the company is developing new products and industries also group the P/E ratio multiple whatever comes that is close to the industry P/E so some stocks which at first glance appear highest priced may upon analysis, be the biggest bargains.

Now let’s talk about five don’t for investor

5) Don’t quibble over eighths and quarters:

The authors give the actual story, “An able investor wants to buy 100 shares of a company that listed on NYSE

Stocks price at that time is $35.50 and they put the order for $35. and they want to save $.50 for each means $50 for 100 shares. (Common Stocks and Uncommon Profits book)

The stocks never sold at $35 and now these stocks almost 25 years later, stocks are selling at $500.

That person to want in an attempt to save $50, investors failed to make $46,500.

Because $46,500 is 930 times of $50.

It means this investor would have to save $50 for 930 times to break these stocks.

This is called Financial stupidity

Authors say for the small investor the rule is simple: If stocks are right and market time is also come to buy then buy it for market price.

To save for cents or a dollar you lose millions of dollars in the long term.

If stocks do not get a million dollars from investment then why do you invest in that stocks? common sense

For big investors that want to buy 1,000 shares so for this, the rule is not simple,

If the trading volume is low, an attempt to buy at the market will cause a sizable increase in stocks price which will produce two effects:

Might arouse the interest of others who also wanted to buy
sellers might plan, thus also stop seeling and hold in hoping that the rise might be continued.

For a big investor, hire a broker and let him buy systematically for you, because buying from big investors, the stock price does not go high.

This is all about the common stocks and uncommon profit, chapter 8 five doesn’t for investors

If you are small investor then please avoid Financial stupidity, Because mos of the investor do this.

Previous Chapter

Visit another Value investing website:

If you want to learn more about fiance then read follow books summary

The Intelligent Investor by Benjamin Graham

One Up On Wall Street by Peter Lynch

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

[Read more…] about When to sell stocks

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

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.