I have to concise from my summary of parag parikh book.
I will share it asap.
Meanwhile i am sharing notes from peter lynch book
“One upon wall street”
Following is from One upon wall street.
INVEST IN COMPANIES THAT HAVE NOT CAUGHT THE FANCY OF WALL STREET
A…Invest in simple companies that appear dull ,mundane and out of favour
B…I like negative/no growth/slow growth industry because they do not attract competitiors and are not well researched by wallstreet
C…Some recommand contrarian approach .But true contrarian is not investor who takes opposite of popular hot issue but true contrarian buys stocks that nobody cares about.
D…I like companies having little or no
institutional owenership.
=If you invest in such companies before institutional investors, entry of such institutions in future will make stock multibagger.
There are many reasons why small good companies have little or no insttutional owenership.
The reasons are
…Some funds have rules that they can not invest below predefined mcap(e.g below 1000 crcap)
…Some mutual funds does not allow >10% holding in any single company so this will miss small fast growing companies
…Mutual fund managers are answerable if small company doesnot perform
…Some funds have rule of four.
That means that mutual fund can only invest if company is selected by all (4) fund managers
E… If you find company having no institutional investor, you have found potential winner but if there is no analyst following company , you have found double winner.
=I am equally enthusiastic about once popular stocks the professionals have abandoned
IF I HAVE TO AVOID ONE STOCK,
IT WILL BE HOTTTEST STOCK IN HOTTEST INDUSTRY.
=These stocks get most attention and everywhere these stocks are discussed
=Why i will never invest in hot stocks?
Reasons are
A…Hot stocks are usually expensive to their true valuation because everyone want them in their portfolio
B…That’s where promoters and shysters go because
that’s where they can get the biggest bang for the buck. The sector is rife
with fraud.
C…High growth and Hot industry attract smart crowd that awake day and night to get into buisness.If you dont have niche/patent ,profit margin will be shrunken by huge competition.
=When analyst expect double digit growth forever, the industry(so called hot industry) go into decline
=I like no growth/ low growth industry
=There is nothing thrilling about high growth industry,only to watch stock going down because for any single product ,there are thousands of companies to make it cheaper
=e.g. disk drive
Experts said industry will grow at 52%.
Industry did it, but 35 companies in competition, no one made profit
=e.g. Carpet was once a hottest industry and every american want it.
Huge competition occured and only few of thousands companies made profit
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