Common Stocks and Uncommon Profits book review

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

Common Stocks and Uncommon Profits: Chapter 11- Summary and Conclusion
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

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

How to find growth stocks
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:

  1. The author doesn’t approach management at this stage.
  2. 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.
  3. 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:

  1. The author does a Glance over the balance sheet to determine the general nature of capitalization structure and financial position.
  2. 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.

  1. The companies considered as idea bought from 250 ideas, then choose one
  2. Those companies investigated actually bought from 40 to 50 ideas, then choose one.
  3. 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:-

  1. 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.
  2. Brief scrutiny of few point in SEC prospectus, scuttlebutt method aggressively for 15 points.
  3. Contact the management only in occasional cases when 15 points are qualified by the company reasonably.
  4. 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.

When to sell stocks

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:

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: The Intelligent investor book

Read more: One up on wall street book

Common Stocks & Uncommon Profits

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…