A thread on Peter Lynch& #39;s 13 filters for Finding the Perfect Stock from his book, & #39;One Up On Wall Street& #39;.
Enjoy reading!
Enjoy reading!
1. IT SOUNDS DULL—OR, EVEN BETTER, RIDICULOUS
“The perfect stock would be attached to perfect company, & perfect company has to be engaged in a perfectly simple business, & the perfectly simple business ought to have a perfectly boring name. The more boring it is, the better.”
“The perfect stock would be attached to perfect company, & perfect company has to be engaged in a perfectly simple business, & the perfectly simple business ought to have a perfectly boring name. The more boring it is, the better.”
2. IT DOES SOMETHING DULL
“I get even more excited when a company with a boring name also does something boring.”
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“I get even more excited when a company with a boring name also does something boring.”
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3. IT DOES SOMETHING DISAGREEABLE
“Better than boring alone is a stock that’s boring and disgusting at the same time. Something that makes people shrug, retch, or turn away in disgust is ideal.”
“Better than boring alone is a stock that’s boring and disgusting at the same time. Something that makes people shrug, retch, or turn away in disgust is ideal.”
4. IT’S A SPINOFF
“Spinoffs of divisions or parts of companies into separate, freestanding entities—such as Safety-Kleen out of Chicago Rawhide or Toys “R” Us out of Interstate Department Stores—often result in astoundingly lucrative investments.”
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“Spinoffs of divisions or parts of companies into separate, freestanding entities—such as Safety-Kleen out of Chicago Rawhide or Toys “R” Us out of Interstate Department Stores—often result in astoundingly lucrative investments.”
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5. THE INSTITUTIONS DON’T OWN IT, AND THE ANALYSTS DON’T FOLLOW IT
“If you find a stock with little or no institutional ownership, you’ve found a potential winner. Find a company that no analyst has even visited, you have got a double winner.”
“If you find a stock with little or no institutional ownership, you’ve found a potential winner. Find a company that no analyst has even visited, you have got a double winner.”
6. THE RUMORS ABOUND; IT’S INVOLVED WITH TOXIC WASTE AND/OR THE MAFIA
A company surrounded by rumors keeps the wall street and other institutional investors stay away from it. For e.g., a company with a rumor of toxic waste or Mafia involvement may be an excellent opportunity.
A company surrounded by rumors keeps the wall street and other institutional investors stay away from it. For e.g., a company with a rumor of toxic waste or Mafia involvement may be an excellent opportunity.
7. THERE’S SOMETHING DEPRESSING ABOUT IT
The mortuary business is a good example.
“If there’s anything Wall Street would rather ignore besides toxic waste, it’s mortality.”
The mortuary business is a good example.
“If there’s anything Wall Street would rather ignore besides toxic waste, it’s mortality.”
9. IT’S GOT A NICHE
“I always look for niches. The perfect company would have to have one.”
Examples:
“Drug companies and chemical companies have niches—products that no one else is allowed to make.”
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“I always look for niches. The perfect company would have to have one.”
Examples:
“Drug companies and chemical companies have niches—products that no one else is allowed to make.”
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10. PEOPLE HAVE TO KEEP BUYING IT
“I’d rather invest in a company that makes drugs, soft drinks, razor blades or cigarettes than in a company that makes toys. In the toy industry, somebody can make a wonderful doll that every child has to have, but every child gets only 1 each.”
“I’d rather invest in a company that makes drugs, soft drinks, razor blades or cigarettes than in a company that makes toys. In the toy industry, somebody can make a wonderful doll that every child has to have, but every child gets only 1 each.”
11. IT’S A USER OF TECHNOLOGY
“Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in a company that benefits from the price war.”
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“Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in a company that benefits from the price war.”
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12. THE INSIDERS ARE BUYERS
“There’s no better tip-off to the probable success of a stock than that people in the company are putting their own money into it.”
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“There’s no better tip-off to the probable success of a stock than that people in the company are putting their own money into it.”
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