the intelligent investor chapter 8 summary

Intelligent Investor: Chapter 15

November 29, 2020 by Laxman Sonale 3 Comments

Hello friend, in today’s article we see chapter 15 of the intelligent investor book. In this chapter, benjamin gram discusses the enterprising investor criteria. These criteria help you to become an enterprising investor in-stock selection. Let’s see chapter 15 of the intelligent investor book.

Previous Chapter 14

6 Criteria for the stock selection:-Intelligent Investor: Chapter 15

Strong financial condition: Each and every investor those are a defensive investor or an enterprising investor sees the strong financial condition of the company. This condition helps you to boost your confidence about the investment, so check for a strong financial condition. (Intelligent Investor: Chapter 15)
Earning Stability: Enterprising investors also check the earning stability and this earning increase by 5 % in a positive way. For this purpose, you can consider the previous year’s earnings.
Dividend Record: Great investor of all time warren buffet says, ” Your investment principle gets from the dividend, and with this dividend, you can invest in other companies. all your investment money comes in dividend form, so check for the dividend record. “
Earnings Growth: with a dividend record enterprising investors also check for the earning per share i.e. earning growth. This EPS increased by 4% in these years as compared to the previous year.
Moderate P/E ratio: You can also for the price-earning ratio. this ratio is not more than 15. If your price-earning ratio is more than 15 so don’t buy that company’s stocks. This type of company takes money from the investor for the trading event. this type of event can be changed every time. (Intelligent Investor: Chapter 15)
Moderate P/B ratio: enterprising investors also check for the price-book ratio. this ratio is not more than 1.5. and also make calculations between the p/e ratio and p/b ratio it’s multiple is not more than 22.5.

we see the 6 criteria for stock selection for the enterprising investor, with this author, gives us some other things that every enterprising investor considers.

how to become a value investor

Other things to consider:

Net-Net result: enterprising investors see the net-net result that means current asset – current liability. making this calculation you get the exact condition of the company.
Special situations: enterprising investors check for the company’s special situations like acquiring the company, novel discovery, etc. (Intelligent Investor: Chapter 15)
Selecting individual stocks is not necessary: If you are very busy with your work so you can hire a broker for your Investment.
Use virtual money to pick stocks: If you are a beginner in the stock market. Benjamin gram recommends you practice for one year with the virtual money to pick stocks. After this, you can use your real money for the investment. (Intelligent Investor: Chapter 15)
Index funds: author give the most advice the buy index funds with minimum charges and invest them each and every month.

after this author gives us the two traits of an enterprising investor, those are as follows:

Disciplined and consistent: Don’t change your approach even if it is unfashionable regarding stock selection.
Pay little attention to what the market is doing: enterprising investor has to focus on what they need to do and how to do it. (Intelligent Investor: Chapter 15)

this is all about the enterprising investor traits and criteria

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Enterprising investor need qualities to success

November 9, 2020 by Laxman Sonale Leave a Comment

Hello friends, In today’s article we see what is the enterprising investor and the qualities that help to get success, these qualities form the intelligent investor book, In the article, we discuss enterprising investing, the quality needs to get success from chapter 6 and 7 of The Intelligent Investor book. let’s see step by step.

Previous Chapter: Click here

Enterprise Investor needs qualities to succeed:

To become an enterprise Investor, you have to face two challenges they are as follows

Enterprising Investing is physically, and intellectually challenging
It requires lots of time and lots of energy.

the author gives some knowledge required to become an enterprise investor. an enterprise investor is not doing trading all day. So for that purpose author give some point regarding day trading to become an enterprise investor. (Enterprising investors need qualities to succeed)

Day Trading:-(Enterprising investor need qualities to success)

Day trading as financial suicide: When you are trading, you have to sell the share on that day. It becomes sometimes risk and the maximum time you lose more money, for this reason, the author says about this on day trading.
The broker always makes money: In day trading broker always makes money, they make money when you buy. And also when you sell a share of the company.
Difficult to Brake even: Day trading is very hard to give up on those things when you doing that. In this process you try to convince yourself to you can do better. (Enterprising investors need qualities to succeed)
Some bets you win, but most you lose: In day trading time you win by your luck, and the maximum time you lose the tonne of money in day trading.
Patient investors get to keep almost everything.
Say no to IPOs is probably overpriced: In IPO people decide the price of shares with an optimistic point of view, they think someone else sits in the market to give them more money on share. So the reality is that the market is the Voting machine in the short term and the weighing machine in the long term, so say no to IPO. (Enterprising investors need qualities to succeed)

The author gives us some pointers to be considered as an enterprise investor, they are as follows:

Some knowledge of Enterprise investors: (Enterprising investors need qualities to succeed)

Pay attention to value, not price: The market is the voting machine in the short term, so pay attention to the value, not on price, price can fluctuate or manipulate by some traders.
Be wary of stocks with good prospects: Buy the good stocks of a company with good prospects.
P/E < = 25: The price earning ratio is less than 25 not only for one year, you can take it for five to seven years of average earning. (Enterprising investors need qualities to succeed)
Look where others are not looking.
To obtain better than average results, remember: 1) the Approach should be different from others 2) the Company should pass the test of soundness

After this author gives us some recommendations to look for the opportunities, they are as follows.

Where to look for opportunities(Three Recommendations):

Relatively unpopular large companies
Purchase of bargain issues: In this, you get the bargain issues by doing Current asset – total Liabilities = intrinsic value, so you can get the good opportunities here. (Enterprising investors need qualities to succeed)
Special situation: when the bear market time you get the maximum opportunities that have good prospects. say no to the preferred stocks.

After this explanation author gives some advice that relates to the ideal word for Intelligent investors. they are as follows.

Some Advice:

Can’t time the market: most people do that but it does not run the intelligent investor.
A great company is not a great investment if you pay too much for it: so if you need a maximum return and then buy a small company with good prospects.
The sale and market cap of small companies double easily.
Invest in big companies when something goes wrong.
Don’t put all eggs in one basket.
Great fortunes are made by concentration but not stable for the long term, so put your egg with different companies also. (Enterprising investors need qualities to succeed)

So if you follow this advice you will become an enterprise investor, lastly, the author gives us some recommendations they are as follows:

Research stocks that have hit a 52-week low
Invest in foreign stock also.

Read more: One up on wall street book summary

This is all about the enterprise investor in chapters 6 and 7 of the intelligent investor book.

To visit the book summary website: Click here

Next chapter 8 of The Intelligent Investor book

Defensive Investor Qualities

November 8, 2020 by Laxman Sonale Leave a Comment

Hello friends, in today’s article, we see the defensive investor qualities from the intelligent investor book, In this article, the author gives us two types of intelligent investors. They are defensive investors and enterprising investors. Defensive investor qualities help you to avoid stupidity and save money from losing money in the market.

Read previous chapter 3: Click here

Defensive investor Qualities:-

The defensive investor has some qualities, which are as follows:

Emotionally Challenging: If you want to be a passive investor you have to be emotionally stable, so a defensive investor is more emotional challenges. (Defensive Investor Qualities)
Detachment from the hullabaloo of the market: They have to courage to ignore the market.

Some knowledge for defensive investor qualities:

The risk lies within ourselves: Investor is the enemy of himself, so the risk lies within ourselves. So do financially safe and make minimum trading.
Asset allocation has nothing to do with age: Making money in the stock market does not need any age. If you want to make an investment in the stock market you need money.
Fundamental circumstances: This whole depends upon the fundamental circumstances of our financial life.
How much money put in stock: The author suggests that in stock you put your all money of 25% in the stock market. remaining use for your lifestyle. never put 100% of the money in stock, Those only put 100% money who face the last market crash. (Defensive Investor Qualities)
Change allocation when your circumstances change.

When to put 100% in Stocks:

the author gives some criteria for putting 100% of the money in stock, they are as follows:

Survived a previous bear market.
Did not sell during a previous bear market.
Bought more stocks in the previous bear market.
Set aside cash for at least one year.

author strictly says’s ” Don’t fool yourself into believing that it’s easy if you haven’t lived through a bear market.”

Four rules for a defensive investor:

the author gives us some important rules for the defensive investor, they are as follows:

Diversification: defensive investors have to do the diversification of their stock minimum of 10 to 30 stocks.
Large, prominent, conservatively, financially comfortable company: choose this type of company for the defensive investor.
The long record of continuous dividend for 10 years: Those companies have to be a record of 10-year dividend yield. (Defensive Investor Qualities)
Limit on price: Benjamin gram Recommended 25 X average earnings over the past 7 years, a maximum of 20 X last year’s earnings.

after this rule, the author gives us some advice for the defensive investor.

Some advice for a defensive investor:

Buy the company stock at a reasonable price
after that then relax on investment
Turkish proverb is that “After you burn your mouth on hot milk, you blow on your Yoghurt.

Peter Lynch, the greatest fund manager: peter lynch gives the simple philosophy of investing for the defensive or common investor, that is common knowledge of the product that we use daily. after that, you can do an analysis of the stock. (Defensive Investor Qualities)

Benjamin gram gives us more advice for the defensive investor, they are as follows:

And some more advice:

Don’t invest in only one stock, buy a minimum of 10 stocks.
Trade less
Defensive investors win the race by sitting quietly.
Realizing that you can’t predict the future.
Dollar-cost averaging: This concept we see in the other article.

If you want to become a defensive investor you have to follow this rule and also advice. if you follow this you will be a rich man after a long-term compounding effect. (Defensive Investor Qualities)

Those people don’t have knowledge of finance and balance sheets or accounting, they also become defensive investors by Taking minimum charges of INDEX FUND. So this is all about the defensive investor.

Seth Klarman 30 big points on investing