Introduction: An article reveals the secret of Peter Lynch’s victory!
In people’s eyes, he is the embodiment of wealth, his words are the treasure trove of all investors, his fund is the most profitable in history, and he is the “stock angel” Peter Lynch – one of the greatest investors in history. His contribution to mutual funds is like Jordan to basketball and Duncan to modern dance. He is not the kind of fat headed businessman that people know in their daily lives. He elevated the entire competition to a new level, turned investment into an art, and tightly captured the attention of every investor and saver in the country. Of course, he also gained great reputation and wealth in this game.
The Four Rules of Peter Lynch’s Stock Investment
Rule 1: Understand the stocks you hold
The first rule is that you must understand the stocks you hold. It sounds simple, but we know that very few people can do it. You should be able to explain to a 12-year-old child in two minutes or less why you bought a stock. If you cannot do it, and the only reason you bought a stock is because you feel its price will rise, then you should not buy it
I can tell you a simple common stock – a type of stock that most people would buy. It is a relatively ordinary company that produces products that are also very simple. The product has a 1M memory CMOS, a bipolar RSC floating point I/O interface processor, 16 bit dual channel memory, Unix operating system, Whetstone silicon emitter with millions of floating-point operations per second, high bandwidth, and 15 microseconds of computing power. ”
If you hold these junk stocks, you will never be able to make money – never. Understanding the stocks you hold is very important. The companies you invest in should be simple. The ones that bring me good returns are simple companies that I can understand, such as Dunkin ‘Donuts, Laquinta Motel, etc. These companies are the ones that can bring good returns. ”
Rule 2: Making economic forecasts is futile
Predicting the economy is completely futile, don’t try to predict interest rates. Alan Greenspan is the head of the Federal Reserve. He can’t predict interest rates. He can raise or lower rates, but he can’t tell you what interest rates will be in 12 months or two years. You can’t predict the stock market
I really hope to know this information. It would be very helpful for me to be informed when a recession is about to occur. It would be very good.
Most of you here should still remember the recession from 1980 to 1982, which was the most severe recession after the Great Depression. At that time, our unemployment rate reached 15%, inflation reached 14%, and the base interest rate was as high as 20%. Has anyone received a call informing you that there will be a decline? Do you remember any of the magazines you often read that successfully foresaw that situation? No one told me that such a tragic situation would arise. ”
You may not believe how much time people waste predicting what will happen a year later. It’s great to know in advance what will happen a year later. But you can never know. So don’t waste your time. It’s not beneficial
Rule 3: Don’t worry about the index
“You have to look for companies like McDonald’s and Wal Mart. Don’t worry about the stock market. Look at Avon. In the past 15 years, Avon’s stock has dropped from 160 dollars to 35 dollars. Fifteen years ago, it was a great company. But now, all Avon ladies are out of place. She knocks at the door, but housewives either go out to work or play with their children. Everything they sell can be bought in supermarkets or pharmacies. Avon’s profit base has collapsed. This company has only been great for about 20 years.”
The closing price of the stock market today is 2700 points. Even if today’s closing price is 9700 points, Avon is still a tragic company. The stock price has fallen from $160 to $35. Therefore, regardless of how the stock market performs in the past 15 years, your investment in Avon has been dismal
During this period, McDonald’s performed very well. They entered overseas markets, launched breakfast and takeout, and did a great job. During this period, their performance experienced a magical rise, with profits increasing by 12 times and stock prices rising by 12 times. If the Dow Jones closing price today was 700 points instead of 2700 points, your investment in McDonald’s could still achieve good returns. Its stock price may be $20 instead of $30, but you can still make 8 or 9 times the profit. “” Focus on individual stocks and forget the big picture
Rule 4: Don’t be impatient, you have plenty of time.
You have plenty of time. Don’t have the idea that as soon as you think of a concept, you must immediately put it into practice. In fact, you have enough time to conduct thorough research on the company. Stocks that bring me substantial returns are those that I buy after paying attention to them in the second, third, fourth, or fifth year. Losing money in the stock market can be quick, but making money is slow. There should be some balance between making money and losing money, but in reality there isn’t
“I would like to talk to you about Wal Mart, a company that was listed in 1970. At that time, they had 38 stores, a beautiful historical business record and a solid balance sheet. After the spin off — of course, Wal Mart’s stock is never popular for the reason of spin off — after adjustment, its price is 8 cents per share. You may tell yourself that if I don’t buy Wal Mart’s stock next month, I will miss the best investment opportunity in my life.”
“Five years later, Wal Mart had 125 stores, and its profit increased to seven times that of five years ago. Guess what? The stock price rose to five times that of five years ago, reaching 41 cents per share.” “As of December 1980, Wal Mart had 275 stores, and its profit again rose to five times that of five years ago. Guess what? The stock price rose to five times that of five years ago, and now it is $1.89 per share.” r>”In December 1985, it had 859 stores, which does not include Sam’s Club. During this 5-year period, profits have increased sixfold and the stock price is now $15.94. So you can tell yourself, oh my god, this stock has risen from 80 cents to $15.94. I bought too late. That’s crazy. I shouldn’t buy into these bulky giant companies anymore. No, it’s not too late for you to buy now, it’s not too late at all. Because today’s closing price of Wal Mart is 50 dollars. You have ample time to buy. ”
“In 1980, Wal Mart had been listed for 10 years. Its sales revenue exceeded $1 billion, its balance sheet was extremely good, and its business record was good. The real surprise is that these — investing in Wal Mart may not bring you huge profits, but if you bought Wal Mart in 1980, you can still earn 25 times. During this period, this rate of return will beat Magellan Fund to pieces. By the way, I did not hold Wal Mart during this period. At that time, I thought its share price was too high.”
When I applied to work for Fidelity, there were a total of 80 employees. Now, our total number of employees is 7200. At that time, 25 of Fidelity’s job seekers came from Harvard, and a total of 50 job seekers competed for 3 positions. I am from Wharton, and we used to joke that Harvard was a second rate school, while Wharton was a first-class school. Anyway, many job seekers came from Harvard. But I am the only job seeker who has been a caddy for the president for 11 years, so I got one of the three positions
When I worked at Fidelity earlier, we had a joke: the opportunity to work until the next Christmas was a great Christmas bonus. It was a terrible start
The next topic is the ten most dangerous statements commonly found in the stock market
Dangerous statement 1: Since the stock price has already fallen so much, how much more can it fall?
When I first started working for Fidelity, I really liked the stock of Kaiser Industries. At that time, Kaiser’s stock price fell from $25 to $13. I used the dangerous rule of saying 1. We bought the largest single transaction in the history of the US stock exchange. We either bought 12.5 million shares, or we bought 14.5 million shares at a buying price of $11.125, which was $1.5 lower than the market price. I said, ‘What a great investment we’ve made in this stock! It’s already fallen to $13. It’s impossible for it to fall even lower from $25 to this level. Now it’s $11.125.’
When the stock price of Kaiser fell to $9, I told my mother, ‘Hurry up and buy, since the stock price has already fallen so much, it can’t go lower.’ Fortunately, my mother didn’t follow my advice because the stock price fell to $4 in the next three months
Kaiser has no debt and holds 50% of shares in Kaiser Steel, 40% of shares in Kaiser Aluminum, 30% of shares in Kaiser Cement, Kaiser Machinery, and Kaiser Broadcasting – the company owns a total of 19 subsidiaries. At that time, due to the stock price falling to $4, $100 million could buy the entire company
Looking back at that time, the price of a Boeing 747 plane was $24 million. Now, I don’t think you can even buy a toilet for a Boeing 747 with that much money, maybe you can buy an engine. However, at that time, Kaiser Industries’ market value could buy four Boeing 747 planes. The company had no debt. I wasn’t worried about it going bankrupt. But I bought too early, we couldn’t buy more shares because we had already reached the limit
In the end, four years later, they liquidated all their positions and the stock became an excellent investment. The final value per share was $35 or $40. However, buying just because the price of a stock had dropped significantly was not a good investment strategy
Dangerous statement 2: How much more can the stock price rise?
“Dangerous saying 2 is just the opposite of the previous one, which is very similar to the story of Wal Mart, ‘Since the stock price has risen so much, how can it rise even higher?’”
I’ll give you a company that you might not think is a growth company. In 1950, the stock price of Philip Morris was 75 cents. 11 years later, in 1961, the stock price rose to $2.5- a threefold increase. You might say that for a company in a declining industry – whose products are terrible and have no prospects – such a big increase is already enough. How much higher can it go? It has already risen to $2.5. Therefore, you may sell it in 1961
In 1972, 11 years later, the company’s stock price rose to $28. After you made three times the profit in 1961 and sold it, it rose another 11 times. In 1972, you might have thought to yourself, since the stock price had already risen so high, how much higher could it go? Then you sold it after the stock price had risen 11 times, and after three times the price, it had risen five times, missing the opportunity to make seven times the profit
So what I want to say is, don’t get involved in technical analysis of stock performance. Stock commentators will use all these terms, adjectives, and opening remarks. If a stock’s price rises, they keep adding new terms. They will say that the stock price is too inflated, then too high, seriously inconsistent with intrinsic value, or the stock price is super inflated. They have mastered all the terms that describe stocks being overvalued
If you like this company, this shouldn’t interfere with you. You should tell yourself, ‘I like this stock priced at $30.’ But you can never get rid of the comments of stock commentators. But you have to get rid of these comments. Because you’re right, you should say, ‘I like this stock priced at $30.’ These commentators are wrong
However, when the price of this stock rises to $50, the commentator’s words may come to mind. You may say, ‘Wait, when the stock price is $30, these people are very sure that the stock price is overvalued. Now that the stock price has risen to $50, they are definitely right.’
So you really need to block these comments from being affected by them. I once bought Subaru after it rose 20 times to its original price. I was lucky because I earned 7 times after buying. I have also bought stocks whose stock price dropped from $20 to $12. I have bought a lot of this type of stock. Now, you can’t buy a box of Hershey Bar chocolates for $5- they cost 5 cents each. ”
Therefore, the historical performance of stocks is not related to their future performance. It is the company’s performance that is related to its future performance
Dangerous statement 3: How much can I compensate? The stock price is only $3
The third dangerous statement is very important, and I can always hear it: ‘The stock price is $3. How much can I lose? The stock price is only $3.’
Now let’s do some arithmetic, back to our basic mathematical knowledge. If you buy two stocks, one with a stock price of $60 and the other with a stock price of $6, and you invest $10000 in each of these two stocks, if their stock prices fall to zero, you will lose exactly the same amount of money. This is obvious. The result is like this. People just don’t believe this. After you go home and calculate it yourself, you will know
Many people often say, ‘Oh my god, these idiots actually bought stocks for $60, and I only bought stocks for $6. How good my investment is!’
However, pay attention to those who make money by short selling stocks. They will not short sell this stock when the stock price reaches $60 or $70 and is still in an upward trend. They chose to buy in during the process of stock price decline and sell short when the stock price dropped to $3. So who is taking over the stocks that these people are short selling? Those who say ‘if the stock price is only $3, where else can it go?’. ”
Dangerous statement 4: Ultimately, everything that falls will rebound
Taking RCA company as an example. It used to be a very successful enterprise. It took 55 years for RCA’s stock price to bounce back to its 1929 level. It can be seen how high the pricing was at that time. So the idea of holding onto a stock and thinking it will eventually rebound to a certain price is completely impractical. Johns Manville Company, Mobile Home Company, Double Button Knitwear Company, Floppy Disk Company – Winchester Disc Drive Company, remember these companies, their stock prices never rebound after falling. Don’t wait for the stock prices of these companies to rebound. ”
Dangerous statement 5: The situation cannot be worse, I should buy
Buying stocks simply because the company’s situation is bleak. It’s dangerous to buy when the situation can’t be any worse.
In 1979, there were 96000 railway freight cars in the United States. As of 1981, the number had decreased to 45000 knots. This is a low point in 17 years. You say to yourself, ‘Railway freight cars have dropped from 96000 to 45000.’. This is the worst situation in 17 years, how much worse can it get
If this is the only reason for your purchase, then in 1982 you will find that the number of freight cars decreased from 45000 to 17000, and further decreased to 5700 in 1983.
It is dangerous to invest a large amount of money in a certain industry solely because its economic situation is deteriorating. ”
Let’s take another example of oil drilling. In 1981, there were 4520 onshore oil rigs in the United States. In 1984, this number decreased by half to 2200. At this time, many people entered the industry. People said it was time to buy into the oil service industry because the number of rigs decreased by half. Two years later, the number of rigs decreased by 70% to only 686. Now, the number is still below 1000. Therefore, it is not wise to buy just because a company’s situation is very bad
I have seen companies in difficult situations, and the next time you call their situation unbelievable, you will describe their situation as terrible, disappointing, or unbearable.
Therefore, the best experience I have learned from the textile industry is that Berlington Industries is still a relatively new textile company, as it was founded in 1908 and the textile industry has existed for a long time. The textile industry has experienced a bleak period, and they know what it’s like. They have witnessed the era of decline. ”
The people in textile companies and clothing exhibition companies are different. The latter is a relatively optimistic group. If you ask them about the effectiveness of their exhibitions, their answers are always words like ‘great’, ‘fantastic’, ‘everyone loves it’, etc. They are always cheerful, similar to people in software companies
But people in the textile industry are relatively calm. They have experienced decline and difficult market conditions. There is a wonderful saying in the textile industry: ‘No matter how hard it is, it will never come.’
Dangerous statement 6: When the stock price rebounds to $10, I sell
Once you say this, the stock price will never rebound to $10- never
How many times has this happened? You pick a price and say, ‘I don’t like this stock. When the stock price returns to $10, I sell it.’
This attitude will make you suffer greatly. The stock price may return to $9.625, and you may never be able to wait for it to return to $10 in your lifetime. If you don’t like a company, regardless of whether your buying price was $40 or $4 at the time, if the factors for the company’s success are no longer there, and if the fundamentals weaken, then you should forget about the previous price trend of the stock. ”
Hope and prayer for the stock price to rise are of no use. I have tried to do this before, but it didn’t work. The stock doesn’t know that you are holding it
Dangerous statement 7: Never sell Long Island Lighting Company
ConEd’s stock price fell by 80% within 18 months, and then rose to six times its original value. Indiana Public Service Company, Bay State Municipal Corporation, and Long Island Lighting Company each experienced a decline of over 75%, followed by a significant increase. Some high-quality banks in Texas, whose equity to asset ratios are between 8% and 9%, saw their stock prices drop by 100%. The company is dynamic. Their development is driven by some forces. You must understand what these forces are. ”
A tragedy in life is that sometimes people inherit stocks. They inherit a stock without knowing what it is, but their mother tells them, ‘No matter what you do, never sell Long Island Lighting Company’s stock.’ I’m not talking about reading the financial section of newspapers. The company has a small factory called Shoreham, which has been overdue for seven or eight years and has a budget overrun of $5 billion to $7 billion. People don’t want it. ”
Dangerous statement 8: Money lost due to not buying
The eighth dangerous statement is terrifying: Look how much money I lost because I didn’t buy it. “” This statement has always troubled me. Remember: if you don’t hold a rising stock, quickly check your bank account, you haven’t lost a penny. If you see the stock price of a home sales network rise from $6 to $60 and you don’t hold the company’s stock, you haven’t lost $300000. Only when you hold the stock and the stock price drops from $60 to $6, will you lose money
There are an incredible number of people who are troubled by empty space. Based on my imagination, if the stock market rises 50 points in one day, someone might say, ‘I just lost $28 billion.’
So, remember: if you don’t buy a stock, but the stock price later rises, you’re not actually losing money. In the United States, the only way to lose money is to hold a stock and then the stock price falls. I’ve experienced this situation many times. A very common and basic fact is that if you invest $1000 in a stock, unless you go crazy and do margin trading, your total loss is at most $1000
Dangerous statement 9: This is the next great company
The dangerous statement 9 is very important. Whenever you hear ‘this is the next…’, try to interrupt your thinking and don’t listen to what comes next, because what comes next will always be exciting. The next great company will never succeed. The next Toys R Us won’t succeed, the next Home Depot won’t succeed, the next Xerox won’t succeed – Xerox didn’t do very well either, the next McDonald’s and so on have all failed
Whenever you hear something next, just ignore it
Dangerous statement 10: The stock price has risen, and my opinion is definitely correct
Dangerous statement 10: If the stock price rises, then my opinion is definitely right, or if the stock price falls, then my opinion is definitely wrong
These phone calls always surprise me. Someone called and said, ‘I just bought a stock for $10 not long ago, and now it’s up to $14. You should buy this stock.’ What does he mean by that? He bought it for $10, and now it’s up to $14. Why should I buy it? Just because the stock price went up from $10 to $14? Obviously, people think the fact that the stock price has gone up means they’re right
This doesn’t mean they can guide others. It doesn’t mean anything. I once bought a stock in the fan order market, and the stock price rose from $10 to $14, then fell to 3 cents. I’m not joking. I also bought a stock that fell from $10 to $6, and later rose to $60. I might have sold it for $6.125
Peter Lynch’s 10 pieces of advice
- Far sighted companies cannot bring you returns
Avoid long shots companies. Every time you hear someone recommending stocks to you, they are so excited that their voice is soft when talking to you on the phone. I don’t know if it’s because they’re worried about their neighbors hearing or because they’re worried about SEC surveillance. Perhaps if you make phone calls in a gentle tone, you don’t have to go to jail or only need to serve half of your sentence. ”
Anyway, they whispered softly, ‘The company I recommended to you is very good, unbelievably good, or it’s a powerful company.’ But they missed something. There is a very technical term for these stocks, NNTE, which stands for no near term earnings. These companies are not profitable. They have no historical records (i.e. these companies only have one vision – translator’s note). They only have one great idea. Actually, this idea may work. But it often doesn’t work. ”
Remember: If the stock rises from $2 to $300, you can still get high returns by buying at $8, or even entering at $12. When someone recommends this type of visionary company to you, you can follow up after one year, write them down on paper, and put them in a drawer. Take them out after one year, and take them out again after three years. Look at the fundamentals of these companies three years later before making investment decisions
I have bought 25 visionary companies before. I have been tracking them for 5 years. None of them have made breakthroughs. I have bought 25 companies, but none of them have been successful
- Don’t confuse growth with making money
Avoid high growth, easy to enter industries. High growth industries are a scary field because everyone wants to enter them. How many people have heard of Crown Cork Seal? This is an amazing company. They manufacture cans and stoppers for cans and bottles. ”
All of you here are influential people. How many boards of directors will meet this week to decide whether to enter the canned food industry? How many last year? What about the past 7 years? What about the past 20 years
The stock price of this company has risen to 50 times its initial level. They always maintain a technological lead. They are the industry leaders. They did not change the company’s name to an acronym like Crococo. ”
Canned food is a non growth industry. Sam Walton’s retail industry is also a non growth industry. That’s great – you’re looking for a growth oriented company in a non growth industry. Because no one wants to enter this industry, but Winchester CD Drive is different, everyone wants to enter its industry. ”
The carpet industry in the 1950s was surprisingly good. The fastest growing era for the computer industry was also the 1950s. At that time, the growth rate of the carpet industry was faster than that of computers
I can’t remember very clearly. In the 1930s and 1940s, the price of carpet seemed to be $20 or $25 per yard. All wealthy households had carpet, while everyone else had flooring
Later on, someone invented a special production process. The price of carpets and floor mats dropped to $2 per yard. Carpets are distributed in various places, such as airports, schools, offices, apartments, and homes. People first lay a layer of plywood, and then lay the carpet on top of it
Nowadays, carpets are outdated. It’s best to lay wooden boards. People’s tastes are like this. But in the 1950s, the carpet industry experienced tremendous growth. Unfortunately, the number of carpet manufacturers increased from 4 at the beginning of the 1950s to 195 in the later period. As a result, no company made any money. Due to the growth of the industry, they all lost money. Therefore, don’t confuse growth with making money. In fact, growth often leads to losses
The enthusiasm of the market for biotechnology companies nowadays is astonishing. Most of these companies have 102 PhDs and 102 microscopes. People are buying their stocks like crazy. And what makes me money is Donne Donuts. I don’t have to worry about South Korea’s imports and money supply data. When you hold Donne Donuts, you don’t have to worry about these things
Mathematics in fifth grade is sufficient to meet investment needs
It is necessary to examine the balance sheet. This is very important. If you have received fifth grade math education, then this is enough for investment purposes. I’m good, mathematics was my strong suit – until calculus appeared in mathematics. I am really good at math. Do you remember this math problem? Two trains, one from St. Louis and the other from Dallas, how long did it take for the two trains to meet. I really enjoy this type of question.
But suddenly, quadratic equations and calculus appeared in mathematics. Do you remember? The meaning of calculus is the area under a curve. Has anyone in history understood this? They keep saying that calculus is the area under a curve. I can never understand what the hell is underneath the curve.
However, the advantage of the stock market is that you don’t have to deal with any of these things. If you have studied fifth grade mathematics, you can do well in the stock market. The mathematics used in the stock market is very simple.
You don’t need to use a computer. People say that the computer age has damaged the stock market. What I mean is that if the computer can figure out which stocks to buy and which ones not to buy, then all you need to do is spend some time on the Cray computer.
- Spend 15 seconds on the balance sheet
But you must examine the balance sheet. Almost every company that I hold and make money from has a good financial condition. It only takes 15 seconds to see how a company’s financial situation is. Look at the left side of the balance sheet, then look at the right side. The right side is a mess, the left side is very suspicious. You don’t need to spend too much time to know that this company is not worth investing in. If you don’t see any debt, you know this company is quite satisfactory.
When I first entered this industry, you couldn’t get quarterly balance sheets. Nowadays, you can get quarterly balance sheets. In the past, companies didn’t list the maturity dates of their debts. Now they have to list the maturity dates of all their debts. You can know how much money the company owes the bank from this
I estimate there should be several bankers on site. There is a huge difference between 30-year money and 30-year bank loans. You know what banks are like. They only add icing on the cake. When you are doing well, they treat you to meals and are willing to provide you with various loans. But once you have poor performance for several consecutive quarters, they want to take back the loan and never lend a helping hand
But you can read the balance sheet. You can examine a company to see if it has any debt. Or you may find that the company does have $30 million in debt, but these debts will not mature until 30 years later
- Study the stocks you want to buy just like you study microwave ovens
When I was lucky enough to buy Chrysler, the company had $1 billion in cash and no debt due within three years. They achieved breakeven and had positive cash flow. Therefore, even for cyclical companies, taking a minute to examine their balance sheets was worth it
There is a phenomenon that surprises me, where people compare 10 refrigerators before ultimately purchasing one. They will look up reviews of different refrigerators in Consumer Reports. They will visit 15 stores. But for some unknown reason, they feel so mysterious about the stock market that they don’t realize they have no chance of making money by following a taxi driver’s tip off and investing $10000 in the stock of a biotechnology company
The worst case scenario is that the stock price rises by 30% after they buy it, and they invest another $20000; the best case scenario is that the stock price falls by 30% in the next three months
This situation is too surprising. When people lose money investing in stocks, they blame program trading and attribute the responsibility to institutions: ‘It’s these damn institutions that made me lose money.’. ’If you buy a refrigerator and later find out that it’s a defective one, you’ll say, ‘I’m such a fool.’. I should have done more research, but the refrigerator I bought is of poor quality. ’”
Two days later, these same people went to Hawaii and spent an hour and a half buying round-trip airfare to save $98. People are very careful about these things, but when it comes to stocks, they are very careless
Study the stocks you want to buy like you study microwave ovens. This investment method will bring you better stock market investment returns
You can only know which stock is great after the fact
“Great stocks are always accidents. There is no doubt about that. If anyone knows that he can earn 500 times when he buys Wal Mart, then I think he is an alien. You can never know who is a great company in advance.”
You buy a good company and look back at its performance over the past 8, 10, or even 12 years. You say, ‘Oh my god, look how much money I’ve made.’ But you never know how much you’ll make or lose in the future. You can only know the profit or loss afterwards
It’s like buying a house. Many people bought a house in the 1960s. Caroline and I bought a house for $40000 at that time. Later, house prices rose a lot. When we bought it, no one told us we would make a lot of money. Looking back at the 1960s, no one said, ‘Buy a house, buying a house is a good investment, you will make a lot of money.’ Look, 15 years have passed, and house prices have risen significantly. This was completely unexpected
However, in the past four to five years, people have purchased a large number of properties – their second homes, and they feel that they will make a fortune from it. This approach is not feasible
The same goes for stocks. I bought Stop&Shop, a retail company in Massachusetts. When I bought it, its dividend yield was 7%. The performance of the stock was mediocre, and I thought at the time that I might earn 30%. ”
Four months later, after conducting more research, I found that the company performed very well after acquiring Bradlees. At this point in time, Wal Mart is still not Bradlee’s competitor.
Bradlees began to enter the market of Wal Mart. However, the entire Northeast market belongs to them. Bradlees is a discount warehouse store that is doing very well now. They have transformed the way Stop&Shop operates and launched Super Stop&Shop. They did very well. The stock price has risen 15 times in 11 years. ”
For me, this was completely unexpected. However, the company keeps getting better and I have always held onto it
- Retail investors have a huge advantage
In terms of stock investment, retail investors have an incredible advantage. Some retail investors work in the chemical industry, while others work in the paper industry. They will be informed of changes in the chemical industry’s economic situation nine months in advance of me. They can be the first to know that chlorine is in short supply. They can be the first to know that corrosive agents are out of stock. They can know that inventory is sold out in the first place. But they go buy biotechnology stocks
They also know that building a chlorine gas plant takes 5 to 6 years. Nowadays, in the United States, it is difficult to obtain environmental approval for a bowling alley, let alone a corrosive chlorine gas plant. People can obtain a lot of information about their industry
My favorite example is Smithkline Beck man, a relatively small pharmaceutical company that invented the ulcer treatment drug Tegamet. Until then, there was no other way to treat ulcers except through surgery. ”
For a company, drugs like Tegamet are very good. A bad medicine is when you get better after drinking it, then you say thank you and pay a $4 diagnostic fee. But you have to continue taking Tegamet, otherwise the ulcer will recur. ”
The stock price of this company has risen 15 times. It was called Square before they bought Bicheng Instruments
You don’t need to buy this company while Tegamet is still conducting clinical trials. You don’t even need to buy it when it first goes public. However, when your relatives and friends find that this medicine is effective in treating ulcers, you should buy it at that time. Imagine all the doctors prescribing this medicine and all the pharmacists dispensing it, and you know how good this investment is. ”
How many people here have received tips from doctors about pharmaceutical company stocks? How many people have received tips from doctors about oil or electronics companies
I once received a very good tip from the vice chairman of Holiday Inn Company. About 12 or 13 years ago, he told me about a motel company called LaQuinta in Texas. He said, ‘They defeated us.’. Their products are very good. Their business scope has expanded beyond San Antonio, and they are doing very well. ’The result proves that this is indeed a very good stock. ”
Every few years, you only need to invest in a few stocks with rich information to get good returns. You just need to focus on a certain field and buy local companies that you are familiar with
There was a firefighter in Wilbur Ray, Massachusetts who didn’t know much about the stock market. But he had a great theory. He discovered that two companies in his town were constantly expanding their factories, so he invested $1000 in their stocks every year for five consecutive years. As a result, he became a millionaire
He doesn’t read The Wall Street Journal, he doesn’t read Barron’s Weekly, and he doesn’t have a Cray computer. He just saw that the company was constantly growing, so he concluded that the company’s situation must be very good. They are amazing local companies. ”
Retail investors have some advantages, and I really want to emphasize this point. Retail investors generally think they are amateur basketball players, but they have no hope of winning against the Los Angeles Lakers. In fact, this is completely wrong. Retail investors have many specific advantages
- Professional Investors – An Incredible Contradiction
I know you’ve heard of the often quoted contradiction ‘jumbo shrimp’. I’ve always liked this contradiction. As I have served in the military for two years, another conflicting term that I enjoy is’ military intelligence ‘. ”
However, the term ‘professional investors’ is also a masterpiece of contradictory statements. Professional investors have all those biases, they only buy large cap stocks, they only buy companies with many years of history, and they do not look at companies with unions.
I used to hold companies with unions, which brought me substantial returns. They also won’t buy stocks in industries without growth. We have achieved good returns in this industry. I have bought stocks of bankrupt companies before. I have also bought into companies that are about to go bankrupt. These investments are not pleasant. You may not believe in the bias of professional investors, some people may not buy companies starting with Y, and so on. ”
In addition, there is one of the most important rules for professional investors. If you are a professional investor, you will be fine if you lose money on market recognized blue chip stocks, but if you lose money on other stocks, you will encounter trouble.
For example, if you lose money on your investment in IBM, everyone will say, ‘What’s wrong with IBM?’? ’But if you lose money at Taco Bell or LaQuinta motels, they will say, ‘What’s wrong with you?’? ’If you lose money in companies like the latter, they will kick you out. But you can still suffer unlimited losses on IBM, Minnesota Mining, or Kodak without any problems. ”
There are always some things that make people worry
The last factor to consider is that there are always some things that make people worry. You must ask yourself, ‘How much do I tolerate pain?’ If you are preparing to enter the stock market, you must be able to withstand pain. There are always some very serious things that make people worry
I grew up in the 1940s and 1950s, and the stock market didn’t perform well in the 1940s. People were really afraid of another depression. The leaders of the country were relatively serious and concerned, and they believed that the only reason we emerged from the Great Depression was World War II. They felt that this country was so unstable that if another Great Depression occurred, the entire society would collapse
Later on, it was the fear of nuclear war. In the 1950s, people went crazy building anti nuclear dust basements and hoarding canned food. They built thousands of anti nuclear dust basements
In the 1950s, people were unwilling to buy stocks because they were worried about nuclear war and the possibility of another recession. The 1950s were not such a glorious era, but the Dow Jones index still tripled. Ordinary stocks also tripled, although people were worried about many big problems during this period
More than a decade ago, I vividly remember the price of oil skyrocketing from $4/barrel, $5/barrel to $30/barrel. Everyone predicted that oil would rise to $100/barrel, and in that case, the world would suffer a depression and collapse globally
Three years later, the price of oil fell to $12 per barrel. That’s when people said oil prices would fall to $2 per barrel and we would face a recession. I’m not joking, this is the same group of people who said it. People are worried that the decline in oil prices will lead to large-scale defaults on oil related loans
Later on, people were worried about the growth of the money supply. Do you remember? Money supply data is usually released on Thursday afternoon. We are all waiting to see the latest data. No one knows what these data mean. But they will say that M3 growth rate is flat, M2 growth rate is declining, and so on. Everyone is worried about the growth of the money supply. ”
But this has nothing to do with Melville Company, whose profits have been rising for 42 consecutive years, HJHeinz’s profits have been rising for 58 consecutive years, and Bristol Meyers’ profits have been rising for 36 consecutive years without debt. Do you think these companies care about the money supply? People are worrying unnecessarily. ”
People are starting to worry about the ozone layer and climate change now. If this is a reason to prevent you from buying good companies, then you are in trouble. In fact, if you read Sunday newspapers, the news is so bleak that you may not even want to go to work on Monday
You have to listen to me – this is a great country. In the past 10 years, we have added 25 million jobs, despite big companies cutting 1 million jobs. After World War II, we experienced 8 recessions. We will encounter more recessions in the future. In the past 70 years, the stock market has fallen more than 10% 40 times. We will experience more declines
But if you will always worry about these things, then you should keep your money in a bank or money market account
- Investment is really simple
So you need to find some companies that you have a lot of information about and can understand, and then tie them together. That’s it.