Date post: | 09-Aug-2015 |
Category: |
Economy & Finance |
Upload: | jae-jun |
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What You Will Learn
● The 6 categories according to Lynch● How to classify your picks● Examples in each category
Foreword
Peter Lynch’s book, One Up On Wall Street, refers to the 6 categories assigned to companies in his portfolio.
These are the large (although not always), saturated or aging
companies that are not expected to grow any faster
than your fingernails.
Examples
Not slow growers but not fast enough to give 100% gains within two years.
• Adobe, • Home Depot,
and • American
Express
What are stalwarts good for
• good protection during recessions and corrections
• they are also one of the first to be sold when a new idea comes up
What are stalwarts good for
• good protection during recessions and corrections
• they are also one of the first to be sold when a new idea comes up
Companies that grow aggressively, often have growing pains, yet provide the best opportunities for individual investors before Wall Street comes along.
Up and down, up and down.
Photo credit: xhowardlee / Foter / CC BY-NC-SA
Examples
Fashion, oil, auto industries are a few examples of cyclical industries.
Photo credit: Jaeger-Meister / Foter / CC BY
Lynch informs the reader that too many people label cyclicals
incorrectly.
Photo credit: Nick J Webb / Foter / CC BY
An example is Ford and GM.
Photo credit: myhsu / Foter / CC BY-ND
A majority of what value investors would invest in.
Photo credit: Olivia Alcock / Foter / CC BY
Depressed, beaten and oversold companies
Photo credit: onohoku / Foter / CC BY
They can rebound to its intrinsic value and beyond very quickly
Photo credit: onohoku / Foter / CC BY
once people realize that the company has been successful in turning itself around.
Photo credit: HikingArtist.com / Foter / CC BY-ND
BUT turnarounds don’t always happen
Photo credit: renaissancechambara / Foter / CC BY
Photo credit: RichardAtUCT / Foter / CC BY-NC-SA
On the flip side
Photo credit: euthman / Foter / CC BY-SA
Asset play, what?
Photo credit: Xurble / Foter / CC BY
An asset play is where the company owns something much more valuable than just its business.
Photo credit: i-r-paulus / Foter / CC BY-SA
● or huge real estate that has been depreciated in the books for so many years it doesn’t reflect the true value of the company, like Sears
They can give growth potential, monopolies and can also be resold for millions of dollars.
Photo credit: Emilie Ogez / Foter / CC BY-NC-ND
a great deal of PATIENCE is required before the market
wakes up.
Photo credit: bunchadogs & susan / Foter / CC BY-NC-ND
I’ve only assigned one category to one company but there are companies
that could be a combination.
Photo credit: StockMonkeys.com / Foter / CC BY
So there is a brief outline of the 6 categories, but for additional topics in an entertaining and good read, you can read it for yourself by purchasing it here.
Jae Jun ([email protected])http://www.oldschoolvalue.com
Old School Value improves your investment decisions and performs deep fundamental analysis
and valuation for you. Just like a personal stock analyst.