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Hello friends welcome back to Lead Learn Grow In the previous video we discussed Part One of the book One Upon a Street written by Peter Lynch In this video we will discuss the content of Part Two Part Two Picking Winners In this part Peter discusses how to find good company shares What to look for before buying any shares Six types of companies in the stock market Characteristics of a value company Which company shares to avoid What questions to know before buying any company shares and various topics related to stock research Chapter Six Stalking the Train Baker In this chapter Peter Lynch presents us with a person who knows the business well i.e.
looking for stocks based on the organization he works in because no one will know better than you which company is performing best in that business Stock analysts may be able to analyze company balance sheets and income statements better than a doctor but only a doctor knows which medicine is in high demand so based on the profession you belong to, you should choose stocks Buy Chapter Seven I Have Got It I Have Got It What is It Selecting stocks of the company you are in or the products you use is just the beginning.
This does not mean that you will buy shares of that company. After selecting the company, you have to analyze it and then decide to invest. Italings talks about six types of companies. Slow Growers. Companies that are very large in size and grow at a rate slightly higher than the GDP of the country or more are called slow growers, such as MRF, Gillette India, etc.
The main reason for buying slow growers is the dividends received from them. Steelwords. Companies that give 10 to 12 percent growth per year are steelwords. This category includes FMCG and other consumer durables companies such as Hindustan Unilever, Britannia, Nestle, Asian Paints, etc. Steelwords are safe and give decent returns.
Fast Growers. Fast Growers are companies that grow at a rate of 10 to 12 percent per year from the stock market. Grower companies are the best. Companies that give 20 to 25 percent growth per year fall into this category. These companies have high returns as well as high risks. Some of the fast works of the past are Titan, Wipro, etc.
Cyclicals. Companies whose stock prices fluctuate due to temporarily good and temporarily bad sales fall into this category. For example, automobile companies have sales that increase when the economy is good, but when the economy is bad, their condition also worsens. Timing is very important in cyclical stock investment.
Turnarounds. Companies that are facing bankruptcy or facing some serious problems fall into this category. Since no one invests in such companies, these companies are available at very cheap prices and if they perform well in the future, a lot of wealth can be created from this, but it is very risky.
A current example is Vodafone Idea Asset Place. Companies whose stock prices are lower than their assets such as cash, inventory, land, patents, big customer base. Before buying a company's stock, look at the category it belongs to, then you will understand whether you will get a suitable return from the stock.
Chapter Eight The Perfect Stock What is a Deal Peterlings An unconventional company like that which even a fool can easily run is a perfect company and is worth investing in because one day some fool will run that company. Some characteristics of a perfect company are that it has a common name It does a very common business such as selling soap, selling paint, etc.
It does something unacceptable such as selling drugs It has started a new business, but it needs to be seen whether the company's insiders are buying such a company which is not looked after by business analysts. As a result, such a company is most of the time undervalued. A company which is hearing bad news in the market but the company is really good at its business.
There is also an opportunity to buy such a company undervalued. It does a depressing business for example, making coffins of Khabar It is in a non-growth industry but is increasing its market share It has found its own niche For example, if a pharma company patents a popular drug Brands are also similar to the following: A company whose products have to be bought repeatedly.
A company's profit comes from sales. But if a company makes something that has to be bought repeatedly, then there is no problem finding new customers. It is a technology- friendly company because the insiders of the technology future company are buying shares and the company itself is buying back shares.
Companies that exhibit these characteristics are called perfect companies by Peter Lynch. Chapter Nine Stocks I Had Avoided. The stocks that Peter Lynch advised to avoid are the hot stocks of the hottest industries because these stocks are overvalued due to publicity and no one checks their financial condition.
Be aware of the next something. Many companies are called the next titan, the next Infosys, but you need to stay away from those companies because when the original companies operated, there was very little or no competition, but today, due to excessive competition, it is much more difficult to make more profits.
Difficult to avoid diversification If a company merges with another overpriced company or starts a business that it has no experience with, Peter Lynch called it diversification and he advised us to stay away from such companies because soon the company will face losses. Beware the whisper stock. You should not buy stocks of companies whose company style is called beware the middle man.
Companies whose sales are good but most of their orders come from one or two customers. You should not buy stocks on top of that. Chapter Ten Earnings Earnings Before buying stocks of a company, we must see the income generated from the business. Shares in all countries are not lottery tickets. It is a business partnership and we must see the income generated from the business.
The company's long-term sustainability ensures its income. The ratio related to the company's income is the price to earnings ratio, which tells us how many times we are paying for the income. If the P ratio of a company is 10, we will have to invest 10 taka in exchange for one taka of income. So what is the company's plan to increase its future income?
A company must be analyzed well to increase its income. These are by reducing costs, expanding the business to new markets, selling more products, and closing loss-making subsidiaries. Chapter Eleven Two-Minute Drill Before investing in a company, we must analyze it well. We need to know at least enough information so that we can talk about the company's business future for at least two minutes.
Chapter 12 Getting the Facts In this chapter, Peter Nines shows us the sources of information about a company. Nowadays, we can collect all the important information about the company online through our phones. Through the company's annual report, through investor presentations. Chapter Thirteen Some Famous Numbers In this chapter, Peter Lynch talks about some important ratios that we must check before investing.
Percentage of Sales If you want to invest in a company for a particular product, you must see how much of the product occupies the company's revenue. Price to Earnings Ratio As long as it is good, Debt to Equity Ratio How much debt is there in relation to the company's equity, that is, the shareholder's money, the less the debt, the better.
If a company has no debt, then the chances of the company closing down in bad times are very low. On the other hand, if the sales of a company with high debt are low due to the economic slowdown, the company will be in trouble. Book value How much money is allocated for each share in the company. However, when looking at the book value, we must look at the assets of our company carefully.
Free cash flow per share How much money is earned per share after meeting all expenses, which can be seen through earnings per share. Inventory turnover ratio How quickly the company is ending its inventory because inventory should not be more than sales, except for things whose prices increase over time.
Net profit margin How much percent of the revenue generated from sales does the company earn after meeting all expenses and whether it has been maintained in the past few years. Chapter 14 Rechecking the Story Long- term investing is very important to create wealth in the stock market, but this means It is not that we will not look at a company's stock after buying it.
Looking at the stock price and analyzing the business are different things. Stock prices are driven by human emotions, so without paying much attention to it, we need to see if the company's business is running smoothly after a few months. We can see it after every quarterly result. If sales are low, we need to find the reason.
Through this, if there is a problem in a company, we can sell the stock before the price crashes. Chapter 15 The Final Checklist Before buying all the stocks, we need to analyze that company thoroughly. Peter Lynch has given some checklists in this chapter through which stock analysis will be a little easier.
In the case of stocks in general, we need to see the price to earnings ratio, promoter holdings, and also the debt to equity ratio on the company's balance sheet. And if insiders or the company buys back its shares, it is a good signal. The main purpose of buying such companies is dividends, so we need to see whether the company always pays dividends and You also need to see if it is increasing over time.
You need to see if any company like Elwards has diversified. You need to see the long-term growth rate and whether it is currently maintained. If you want to hold for a long time, you also need to see how the company has performed in past recessions. Fast Growers. You need to see if the company's growth rate is maintained.
You need to see if the business can successfully run in multiple cities. You need to see if there is still growth potential left. Is the expansion accelerating or decreasing gradually? You need to see what kind of products the company sells that you don't have to buy once or repeatedly. Turnarounds.
Whether it can get out of the current situation. How much rate is there? How will it pay off? How will the business turn from loss-making to profit- making? Asset Place. What is the value of the assets in the company and is it increasing or decreasing over time? Is the company taking any new debt because this means the value of the assets will decrease.
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