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One Up On Wall Street: How To Use What You Already Know To Make Money In The Market

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The company has duplicated its successes in more than one city or town, to prove that expansion will work. In addition to that, there is also the ability to generate profit in the future. How to Analyze a Balance in 10 Minutes There is something interesting about Peter Lynch’s approach. He takes the view that middle-class (amateur) investors can beat professionals by using common sense and self-control. While investing is always a gamble, a discerning investor can find companies that put the conflict right to succeed. This is a lovely book written by a very polite and engaging character, full of beautiful anecdotes and sound advice. It has a place in my top twenty investment books. Two recent acquisitions of unrelated businesses look like diworseifications, and the company is still looking for further "at the leading edge of technology" acquisitions. In general, a new manager or a change in the company’s strategy allows better forecasting of future results. Asset plays or companies with hidden assets

Being an investor is often made to look like a job reserved for geniuses. In One Up on Wall Street , Peter Lynch explains how anyone can beat renowned investors by using logic and common sense. It all comes down to putting your money into the companies that you understand. Lynch, P. (1989). One Up On Wall Street: How to Use What You Already Know to Make Money in the Market. First Fireside Edition. New York: Simon & Schuster. It does point you in the direction of financial statements and basic rules of thumb to follow but there's no discounted cashflow analysis in this and rightly so. This is for someone starting out. Pay attention to the long-term. It is way more predictable than the random short-term movements of the markets.The assets can be tangible or intangible assets. It is important to look at the strength of the balance sheet and whether the company is taking on too much debt that could potentially erode the value of the assets in the future.

Next, look for the company’s ways of diversification. Maybe the company is buying shares in non-related businesses from diverse industries. That could be a potential sign of a bad investment. Next, be aware of their customer base. If the company is dependent on few customers, or on one single type, things can go really bad if they leave. So you wouldn’t want to be there when that happens, right? The AAII Lynch approach makes sure that the company’s ratio of total liabilities to assets is below its industry norm. The screen uses total liabilities because it considers all forms of debt. It compares the company’s ratio against industry levels because acceptable levels vary from industry to industry. Normal debt levels are higher for industries with high capital requirements and relatively stable earnings, such as utilities. When oil prices go down, it obviously has an effect on oil-service companies, but not on ethical drug companies Similarly, don’t heed platitudes or beliefs about when to buy and sell (things like, “It’s always darkest before the dawn,” or “If it’s this low, it can’t possibly go any lower”). There simply is never a single rule that works in every circumstance, so you’re better off using your knowledge of the company acquired through research. Most are huge companies like Kellogg, Hershey's, Coca-Cocla, P&G which probably at best give 50% in a year or two, then probably you would want to begin to think about selling

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Growth rate: the only growth that matters is growth in earnings. If the business can increase prices year after year without losing customers, we have a tremendous investment. A company growing at 20% selling at a P/E of 20 is a much better investment than a company selling at a P/E of 10 growing at 10%.

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