posted on July 23, 2019 15:34
Slides covering all important highlighted points from the book.
To make money in stocks you must have “vision to see them, the courage to buy them and the patience to hold them. Patience is the rarest of the three.
- So my discovery in investing, and advise to youngster ones who would endeavor to, is to study markets and invest in long term enterprises which have the potential to vastly outpace other companies and industries and stock with them as long as the theme is intact. Forget about the trading and use the time you would have spent monitoring the trade with your family
- A great deal of investing is on par with the instinct that makes a fish bite on an edible spinner because it is moving. investors too bite on what’s moving and can’t sit on a stock that isn’t going anywhere. they also lose patience with one that is moving against them. This causes them to make a lot of trades and never enjoy truly mammoth returns.
- Investors crave activity, and wall street is built on it. The media feeds it all, making it seems as if important things happen everyday. Hundreds of millions of shares change hands every session.
- Bear market smoke gets in one’s eyes and it blinds us to buying opportunities if we are too intent on market timing.
- When experienced investors frown on gambling with price fluctuations in the stock market, it is not because they don’t like the money, but because both experience and history have convinced them that enduring fortunes are not built that way.
- Relying only on published growth trends, profit margins and price-earnings ratios is not as important as understanding how a company could create value in the years ahead.
- Don’t sell just because the price moved up or down, or because you need to realize a capital gain to offset a loss. You should sell rarely, and only when it is clear you made an error.
- Investors have been conditioned to measure stock price performance based on quarterly or annual earnings but not on business performance. One memorable example is Pfizer, whose stock lost ground from 1946 to 1949 and again from 1951 to 1956. “Performance-minded clients would have chewed the ears off an investment adviser who let them get caught with such a dog.” But investors who held on from 1942 to 1972 made 141 times their money.
- 100 Baggers, I thought you might be interested in my one experience with a 100-Bagger. In 1987, I invested equal amounts in 10 high-tech or biotech companies that had fabulous stories, and that if they could actually get their products or software to market would be huge winners. Well, I tried to be somewhat smart in picking them, but 9 of the 10 went completely under, and in a not-very-long time wither. There were myriad problems, but most had to do with being undercapitalized. The 10th one, a start up named Amgen, hit it, and not only made up for the 9 total losses but returned 800 times my total investment before I had to sell it to send my kids to college in ‘94. Wish I still had it, heh.
- Apple from its IPO in 1980 through 2012 was a 225-Bagger but… Those who held on had to suffer through a peak-to-trough loss of 80% twice! The big move from 2008 came after a 60% draw-down. And there were several 40% drops. Many big winners suffered similar awful losses along the way.
- Imagine if a friend had introduced you to Warren Buffett in 1972 and told you,“ I’ve made a fortune investing with this Buffett guy over the past ten years, you must invest with him.” So you check out Warren and find that find that his investment vehicle, Berkshire Hathaway, had indeed been an outstanding performer, risking from about $8 in 1962 to $80 at the end of 1972. Impressed, you bought the stock at $80 on December, 1972. Three years later, on December 1975, it was $38, a 53% drop over a period in which the S&P 500 was down only 14%. You might have dumped it in disgust at that point and never spoken to that friend again. Yet over the next year it rose from $38 to $94. By December 1982 it was $7765 and on its way to$223,615 today – a compounded annual return of 20.8% over the past 42 years.
- The BSE Sensex has a base of 100 for the 1979.The Sensex first touched 10,000 in February 2006.That’s a 100 bagger in 27 years, or 19 percent annually. As I write, the Sensex is at 27,000
- Looking for 100-Baggers means you’re not going to care much about what the federal reserve Is doing. It means you’re not going to buy a stock because you like the chart (next month’s chart might give us a whole different signal). Paying attention to these things is a distraction. Investing for a 100-baggers means you have to plant your feel firmly in the ground and stand still.
- People get bored holding the same stock for a long time – especially if it doesn’t do much. They see other shiny stocks zipping by them, and they can’t stand it. So they chase whatever us moving and get into trouble.
- Attempting to invest on the back of economic forecasts is an exercise in extreme folly, even in normal times. Economists are probably the one group who make astrologers look like professionals when it comes to telling the future… They have missed every recession in the last four decades! And it isn’t just growth that economists can’t forecast” it’s also inflation, bond yields, and pretty much everything else.
- If you (a) forego ten hamburgers to purchase an investment; (b) receive dividends which, after tax, buy two hamburgers; and (c) receive, upon sale of your holdings, after-tax proceeds that will buy eight hamburgers, then (d) you have had no real income from your investment, no matter how much it appreciated in dollars. You many feel richer, but you won’t eat richer.
- For years the traditional wisdom - long on tradition, short on wisdom – held that inflation protection was best provided by businesses laden with natural resources, plant and machinery, or tangible assets. It doesn’t work that way. Asset-heavy businesses generally earn low rates of return- rates that often barely provide enough capital to fund the inflationary needs of the existing business, with nothing left over for real growth, for distribution to owners, or for acquisition of new businesses.
- The idea business during an inflationary time is one that can (a) raises prices easily and (b) doesn’t require investment in a lot of assets.
- Over the long run, it’s hard for a stock to earn a much better return than the business which underlies it earns. if the business ears 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return – even if you originally but it at a huge discount. conversely if a business earns 18% on capital over 20 to 30 years, even if you pay an expensive looking price, you’ll end up with a fine results.
Finding 100-Baggers checklist:
- You must look for them
- Growth, growth and more growth
- Lower multiples preferred
- Economic moats are a necessity
- Smaller companies preferred
- Owner-operators preferred
- Stay the course
- You need a really good filter
- Luck helps
- Be a reluctant seller