one up on wall street': chapter summary

One Up On Wall Street book summary

February 26, 2021 by Laxman Sonale 6 Comments

Hello friends, In today’s article we see the summary of one up on wall street book. In this chapter, the author says, which things we have to check for our stock, so let’s begin a summary of one up on wall street book.

Checklist: For all stocks in general(One Up On Wall Street book summary)

In a company, you have to check the P/E ratio, and this P/E ratio compares with the other company which has in the same industry.
The Company in you has seen how much is institutional ownership. if you see the institutional ownership is very less, then that is good for the company and you also.
In company stock, you have to see insider is buying and companies buying share back. So both point is a positive sign for investors.
The company, the earning of the company is increasing or not. if constantly increase or increase sometimes and decrease sometimes. (One Up On Wall Street book summary)
In a company, the balance sheet of the company is strong or not means debt or equity. So minimum the debt than the equity and decreases timely then that is a good sign.
Lastly, also see the cash position ( In previous chapter 13 author give the example of FORD company, in this company $16 is net cash is present, means ford company is never going down $16. if is going down then buy the more share.)

* So see specifically each and every category:

Slow growers:

In this category, you have to see the company is paying dividends or not and they pay regularly or increase slowly in a constant way or and give dividends in recession time also.
Company is how much percentage of earning pay in the form of a dividend. If they pay a minimum percentage of earnings in the form of dividends then this is a good sign, If they pay the maximum dividend then earning is decreases, and earnings decrease so no money to pay dividends so this is a like vice-versa to each other.

Stalwarts: (One Up On Wall Street: Book summary)

So in this category, you have to see the company is strong or not easily go out of business.
For this purpose, you have to see the P/E ratio to pay maximum money for that stock. if you pay maximum money then their value is decreased.
Also check of company plan related to the diversification of business, if the company is making diversification, then stay away from this category of company.
See the long-term growth of the company is constant grow or decrease in the previous year, and what happens in recession time, their earnings decrease or not.

Cyclicals:

In a cyclical category, you have to see in the company the supply and demand relationship of the product.
And also see the inventories present in the company( if the company is trying to build up, so in this category there is a new entrance, so that is more dangerous and focus on the cycle of the business.
In a company you have to see how much time is company cycle is staying. (One Up On Wall Street book summary)
So you can easily predict the upper level of the cycle of business but a lower level of the cycle we can’t predict easily. If you know that where to start the cycle of a business is good for you, because most of the people don’t know about that.
For example automobiles stock, this business cycle is staying 3 to 4 year and if they fall as bad as to fall and, they also increase in the very good rise of the business cycle.

Fast growers:

in this category, you have to see, which product is selling in the maximum volume of all products of the company.
So you have to check how much percentage of the sale that product on other product, and how much percentage of earning of that product on the other products of the company. (One Up On Wall Street book summary)
So you see the companies growth rate is 20-25 is a good sign if they more than 30 means that are fake growth and they can’t stay constant and they fall in the coming year.
The company is spread well and they are doing the successful operation in other cities, states and country also, so you have to see this. And see the is there any space for the company to grow.
If they are still in one state and have space to grow in another state then it a good sign for expansion.
So this is not like in the previous example of the limited company, in this company, the company is growing all over all mall i.e 670 out of 700 so there is no space for the growth of the company. So if a company wants to grow then they need a new idea and new innovation in their product to expand.
So you have to see also the PEG ratio. This ratio is one or less than one, and stay than is a good sign.
You have seen the company like Gillette, they sell the lezzer which use and through type. So people use their product every time, and the company is growing continuously. and other company which has sold the electronic surveillance system. They spread all over the country and they don’t have any space for sale and this system stays 10 years of lifespan of that product, so what is the company is doing in 10 years. So the growth of the company stops. (One Up On Wall Street Book summary)
So lazzer selling a business is good, then the electronic surveillance system selling business.
Lastly, you have to see how much institutional ownership is present in the company. if as much as less and very as much as fewer analysts follow that stock.

Turnaround:

In this category, you have to see how much debt is present in the company. as much as fewer the debt is good for that company and you have to see which type of debt is present, bank debt or funded debt.
The company is taking debt that is over than the equity then they affect the earning dilution. So in this debt, you can recover the company but the stock of that company is not recovering in the whole life span.
What is the plan of the company to recover from this situation? and they are selling the unproductive branch of the company. and they reduce the cost. and is there any plan for improvement of the company?

Asset plays:

In this category, you have to see is there any hidden asset present in the company. or if present then what is the value of that asset.
You have to see how much is debt, if the debt is more than the asset, then it is the cause of concern. if they have some value than after paying debt then it is beneficial to the company. (One Up On Wall Street: Book summary)
If a company is taking more debt then this is not a good sign or not have a value of the hidden assets.

Previous chapter

One Up On Wall Street: Chapter 13

February 13, 2021 by Laxman Sonale 5 Comments

Hello friends, in today’s article we see the different chapter 13 of one up on wall street. In this chapter, you get the quantitative part of one up on wall street book. So from this chapter 13, you get which term is important in the balance sheet for looking at investment. so let’s begin.

Previous Chapter 12:

Some famous Numbers:-One Up On Wall Street: Chapter 13

so come in direct point let start with Percentage of sale

1. Percentage of Sales:-One Up On Wall Street: Chapter 13

In a company you have to see which product is selling very fast, as well as the quality of sale, is increasing, means you have to found the product that product sale is maximum. So you have to see the how the percentage of the sale that represent of company. (One Up On Wall Street: Chapter 13)
To see the sale account and how much account of profit that product is given.

2. P/E ratio:-One Up On Wall Street: Chapter 13

so let see the famous ratio that is the P/E ratio. So while looking for the P/E ratio. and then don’t only look at the P/E ratio look also at the company growth, which means earning in growth and compare with them.
If the P/E ratio and company growth are equal that means the company is fairly priced.
So here Peter Lynch talks about the PEG ratio. If the PEG ratio is 0.5 then that company is very good for investment. (One Up On Wall Street: Chapter 13)
If the PEG ratio is less than one then the company is good for investment, and if the PEG ratio is more than one then that the company stock is overrated.
If that PEG ratio is more than two then don’t buy the company stock. So let’s calculate the PEG ratio
The PEG ratio = (P/E ratio)/EPS Growth
So author gives the other things about considering the P/E ratio. (One Up On Wall Street: Chapter 13)
The dividend yield is added with the long term and that sum is divided by the P/E ratio. If you get the ratio is more than 2 then is a good investment and if you got 1.5 ratios then it is also ok.
But if you got the ratio is minimum than 1 then don’t buy that the company stock.

3. Cash position:-One Up On Wall Street: Chapter 13

If the company has maximum cash on the balance sheet then that company is very strong. In the previous chapter, we see the how-to calculate cash per share.
So the author gives the example of a ford company, In company, the stock price is increased from $4 dollar to $ 38, and wall street investors think this stock is overpriced. so let’s see what happen
But in the company, $16.3 of net cash is present at that time, which means if you buy that stock you get the $16.3 cash per share is completely free. (One Up On Wall Street: Chapter 13)
So do calculations, : $38 – $16.3 = $21.7, so P/E ratio is calculate on $21.7 price not on $38 price. so the P/E ratio is about $3.1, so the P/E ratio is 3 which means is a very good P/E ratio.
Ford company also has another insurance subsidiary name is FORD CREDIT.
and his subsidiary earning per share is $1.66, and the same similar company that P/E ratio is 10. If we calculate share price, in that time market trade is about $16.6 in market. (One Up On Wall Street: Chapter 13)
So interesting things is that ford stick is $38 and net cash $16.3 and if their subsidiary trade is $16.6, so you have to do the simple calculation: = $38 – $16.3 – $16.6 =$5.
So you have to buy the ford company at $5, which means that earning per share is 7, and you give $5 so you get the $2 free.
So some company looks like ford but they have the above stuff inside on balance sheet, just we have to think like a businessman. (One Up On Wall Street: Chapter 13)
So author also gives another company example for comparison, let’s see the company name is Boin
it has more cash and their shares price is about $42, and net cash is about $27. so make calculation and you get = $42 – $27 = $15.
so hence no difference in both above company. So ford’s company type of opportunity does not come again and again. so sometimes maximum cash also not affect the company’s goodness, and also if the company has maximum debt or NOSO(Number of shares outstanding) that time also not affect the company having maximum cash. (One Up On Wall Street: Chapter 13)

4. Debt factors:-One Up On Wall Street: Chapter 13

debt factor is the most important factor for identifying the value of the company. So you have to look at the company how much debt or equity.
If 75% are equity and 25% debt, then this company is a good company.
If 90% are equity and 10% debt then this company is a very good company.
If 80% are debt and 20% equity then this company has the weakest balance sheet. So in this situation, you have to focus on the turnaround company, as special attention.
If the debt is maximum then the company can’t become a turnaround company. You have to see in the company which type of debt are they carrying. (One Up On Wall Street: Chapter 13)
one is bank debt and another is funded debt. If they have bank debt, then the bank sees your performance and they realize you can’t do better then they liquidate your company and take their money from it.
Funded debt is the type of debt in which there is no power to liquidate your company, which means you can get the time to recover your company as a turnaround company.
If you select a company then see which type of debt is present on them.
Peter Lynch gives the example of Crysler company, This company becomes the turnaround because they have government-guaranteed debt that is helpful to recover the company. If they have the bank debt Crysler company also can’t recover itself. (One Up On Wall Street: Chapter 13)

5. Dividends:-One Up On Wall Street: Chapter 13

Peter lynch give the example to understand the term of dividends, so let’s see
If any company stock price is $20 and giving a $2 dividend, then this stock giving a 10% dividend yield.
If its stock price is down to $10 and they also give $2 at this time also, means its dividend yield is 20%.
So this stock maximum people buy because this stock comes in the floor means this stock never go down by 10%. So if the dividend price is $2 means the dividend yield is high so people can’t go this stock is down.
If you buy stock for dividends, then you have to see the history of the company. In history, you have to look for 20 to 30 years. (One Up On Wall Street: Chapter 13)
In this period if the company misses any dividend. so this is very important because if you buy slow growers and they miss dividends, then this stock does not become double in number. so you are found in a trap. so always check for dividend yield. (One Up On Wall Street: Chapter 13)

6. Book Value:

In book value, you can’t buy the company because the stock is less than book value, so don’t need to buy the company stock. Because book value can be overstated.
It may be happening if the asset value is not that much seen on the balance sheet. If you buy any stock on book value then check the real value of the asset at this time and confirm that the value is the same as to see on the balance sheet. (One Up On Wall Street: Chapter 13)
If you do not see this then your strategy of investment is 100% fail.

7. Hidden Asset:

In the company, sometimes see are understated on the balance sheet. Sometimes parent company is very cheap than the subsidiary. so focus on also his opportunity.
Many times happen with a foreign company and their subsidiary, so the parent company is cheap than our domestic company.
So careful of any hidden asset, and also see any tax law carry forward point, this is also a hidden asset. Because you don’t need to pay tax in future.

8. Cash Flow:

Peter Lynch says, ” stock price $20 and annual cash flow is $4, means 20% return on cash. If you get the stock like that the stock price is $20 and cash flow $10, which means you get a 50% return on cash for this stock.
For this stock peter lynch say, sell your house and take the loan for investment purposes, because this stock is minimum in number. (One Up On Wall Street: Chapter 13)

9. Inventories:

If the company increases inventories, so this is a bad sign, and also if inventory increases as fast as sales then this is the worst sign for the company.
and also you see the companies inventory is placed at the corner of the parking lot, so that also a bad time. This company can become a turnaround, so for this, you have to wait for this but not necessary for this company if the company happens. (One Up On Wall Street: Chapter 13)

10. Pension plans:

If you looking for a turnaround then also look, in the company, there is also any pension plan.
If there is a pension plan that comes underfunded, means that the pension obligation is more than the pension asset, so this is the cause of concern. (One Up On Wall Street: Chapter 13)
To solve it first then you can invest in the company.

11. Growth Rate:

If you get a business that increases the price of the product is continuously and people also buy that company stock and they don’t lose market share also.
Most of the time this type of product is present in cigarettes, liquor, drugs, etc, so this is a good investment but one cause is that you have to focus.
When someone is died because of a product and they do complain against the company and in between that one person wins then, the company has to pay the maximum money for his penalty. so this risk comes in this company. (One Up On Wall Street: Chapter 13)
In growth rate author say if any company has a 20% growth rate and its P/E ratio is also 20, and another company has a 10% growth rate and a P/E ratio is 10. so let’s what is a difference in that.
20% growth rate company is good than the 10% growth rate, let’s see how.
If a 20% growth rate increase in earing after 10 years the earning rate is 6.19, and if the P/E ratio comes 20 to 10, still company stock price stays 61.9. (One Up On Wall Street: Chapter 13)
and another company that growth rate of 10 increase in 10 years, the earning is growing like 2.50 time, and if their P/E ratio stays 10 then the company stock price is 25.9.
So this is the huge difference between the 20% growth rate and 10% growth rate.

12. Bottom line:

Profit after tax is called the bottom line or also called net income.
So different industries have different bottom lines.
If Company is in the same industry and the profit before tax company to each other and if the company profit margin is increased by 2% so their earnings are increased by 20%. so this is a big factor.
If that company’s profit margin is high they have maximum chances of survival in bad condition because some little losses increase or profit margin is minimum then they are going down. But when this company comes in recovery, this company become the double or triple also, means if 2% becomes 4% 6%. (One Up On Wall Street: Chapter 13)

Remember:

If you want to hold stock for a good or bad time for the long term, then choose the high-profit margin stock. But you want to see a turnaround then look for a low-profit margin so this gives a good return.

One Up On Wall Street: Chapter 12

February 4, 2021 by Laxman Sonale 4 Comments

Hello friends, in today’s article, we see chapter 12 of one up on wall street book. this chapter helps you to know more about the company by asking simple questions. One up on wall street book chapter 12 helps you to find out the best questions you have to ask the company and broker.

Previous Chapter 11

Getting the fact: One up on wall street chapter 12

In this chapter, you get more information about the stock by asking the following questions. if you want to know more about the company ask the following point. (One Up On Wall Street)

1. If you have a full-service broker, ask them some good questions:(One Up On Wall Street)

How you classify this stock as a cyclical, slow grower, fast grower. in this situation most of the time they fast, grower, because they are giving you advice about the stock.(One Up On Wall Street: Chapter 12)
then again ask about Recently growth in earning. What is the P/E ratio from a historical level?
If they tell you to buy now this time, then ask why now buying is good? And this company before buying is why not good? What happens suddenly in the company?
What is the company business and which business comes with maximum profit and how much spending on the growth of the company? (One Up On Wall Street)
How finance the company by doing issuing equity or taking maximum dept?
in this company any insider buying or not and give the analyst report of your analyst, I am study first and then come again ask you some good questions.
You have seen the price and earing report charts report of five years. And also ask the dividends of the company if the company is giving the dividends, then ask how much time pay the regular dividends and any growth in dividends in history to today. (One Up On Wall Street)
In the company is there any institutional ownership or not, if the answer is yes then check how much ownership is there in the company. if the institutional ownership is more then is a good sign for the company.
How many times your analyst follow this stock.

2. Call Investor relations: (One Up On Wall Street)

You can ask some questions directly to the company by using call investor relation. Then ask some question they are as follows
Plan of the company for debt reducing, and what is about that recently launch the drug, if they are a pharmaceutical company or that product. (One Up On Wall Street)
what is the effect on earnings? and how much sales of that recently launched the product in this year?
In this year how much company is opening a new outlet? and also how much percentage the market share increases?
The company is operating at the full capacity of the plant. yes or no.
Properties in the balance sheet that market price value are how much?
If you don’t have any above stuff question, then ask simple two questions 1) What are the positive of the company this year and 2) What is the negative of the company this year. (One Up On Wall Street)

3. Visit the company’s headquarters:(One Up On Wall Street)

Visiting company headquarter ask these questions, they are following
Any fund manager or analyst come in this headquarter. If come in two or three year then, this is a good sign for us, because this company is not followed by any fund manager or analyst.
If the companies headquarter is situated in like that place is not easy to like everyone to go and see.
The good earning and cheap headquarter is a good sign for us.(One Up On Wall Street)
If the company headquarter is used expensive furniture and expensive things in headquarter, then this company is not using the right place of money, so this company loses earnings in the future. So peter Lynch gives some examples is Pepboys and crown cork and shield.

4. Attend annual meetings:(One Up On Wall Street)

you can attend the annual meeting of the company, and talk to executives about the company.
Peter Lynch meets the company executive of XYZ company and ask about that company. Then after that Peter Lynch search the proxy statement of the company and they got the result is that the stock and stock option of the company is about $100 million. (One Up On Wall Street)
And this company’s P/E ratio is high. So if the author wants to increase his income double, then the executives of the company’s net worth also become $200 million.
So becoming this is unrealistic, so peter lynch never buys that stock, and sometime after the stock is going down.
If you think some executives do not become that rich then most of the time you are right.

5. Visit stores, buy and or taste product:

You can visit the store and ask some questions like that.
Ask questions to users of products like, Why you buy this product? and how much time is gone by using this product? and also can you recommend this product to other people. (One Up On Wall Street)
If one or two people give a bad review of that product, then is this no big deal.
So author gives the Apple company example, is that The Apple company is failing in mid-time but this time also in Peter Lynch office order the 7 to 8 macintosh computer and his wife also order macintosh, but the author doesn’t realize this stock and they lose the Apple company. (One Up On Wall Street)
This company can become the turnaround company, and you know the price of Apple Company in today’s day.
And The author also found the Crysler company that also fail for some time but this company become a turnaround by a person name is Lee Iacocca.
Then Peter Lynch calls Lee Iacocca and asks about the plan of the company regarding this situation and they love the plan and they think the plan also is going to execute. then they buy the Crysler company and this company becomes the turnaround. (One Up On Wall Street)

Read more on the previous chapter

Read Annual Report:

Screw the initial colorful pages and come to the annual report, and ask this question about the annual report to you, they are as follows

Cash and marketable securities: you can see how much increase by comparing to the previous year. If increase then this is a good sign.
Long-term debt: In this year and compare with previous year debt. if this debt is minimum than the previous year, if yes then good sign.
(Cash + market securities) > Long term debt: If this is happening then is a good sign by comparing 10 years of the balance sheet.
NOSO: If the Number Of Share Outstanding is decreased then the company does the share buyback, so this is a good sign. That is not mean is that buying buyback any time. you can check for a previous year’s buyback to share.
Net cash per share= [ ( cash + market securities) – long term debt]/NOSO

By asking and seeing the above stuff you get more information about the company.