One Up on Wall Street
We at Purnartha gobble up books and research like no one does. Peter Lynchs book, One Up On Wall Street, gives a smart cheat sheet to identify stocks that are often completely ignored. But soon could end up being darlings on stock markets. He suggests looking at few characteristics of often overlooked stocks. If you find any one of these characteristics or a combination of most of the above, be alert and dig deeper! Chances of finding a winner are high.
The company’s name & their overall business sounds boring/dull or ridiculous. Perfect stock > Perfect company > Perfectly simplified business
The company actually does something really dull / boring. Like keeping directory of phone numbers of all top businesses in your country or manufacturing leather!
Point number 1 & 2 is a great combination. It keeps the oxymoron’s away until something bug happens, thus giving smart investors a lot of time to buy.
The company does something disagreeable.
For example : brooms, plastic spoons and bottles, iron furniture etc.
It’s a spinoff division. Parent companies make sure that these companies are well prepared to go solo since their reputation is at stake. Consider checking insider buying in such stocks.
Institutions don’t own this stock, and analysts are not tracking it.
There are many rumors around the company. For example : Its involved with some toxic waste or mafia or whatever !
There is something very depressing about the company.
The company operates in a non growth industry. Companies operating in non growth have few advantages as well. Everyone knows what high growth industries are, and low cost competition is running into the same to compete. But in non growth industries, no one dares to enter looking at the margins, saturation points etc.
The company has a niche. This niche could be its product / service, the segment or the geographic location etc. And its products are such that, people have to keep buying these products. Means very high repeat orders from same customers.
The company is a user of the technology and not the producer or seller of the technology.
There is no equity dilution.
The company is buying back its shares.
So how do we apply it in Indian context and find good companies to invest? Well the answer is simple, start from 1 and don’t stop till you reach 2