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.
- 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.
- 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.
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