He uses a theory similiar to Warren Buffetts "circle of confidence". Lynch describes how the average individual can spot things that could take Wall St months if not years to find. Here he takes the theory a little further in search of what he calls a "ten bagger" a stock that will return your purchase price 10-fold.
And put your entire money into it just to appear smarter.This book is a sequel to Lynch's "Earn and Learn" Where he introduced the basics of the stock market and what the numbers all mean. Similarly, there is one more company called “ Shaily Engg ” which derives more than 50% of revenue from IKEA & runs the risk of a similar fate as that of RS Software.Īvoid companies where you don’t understand the business: People are more comfortable investing in something which they don’t understand. Example would be Kolkata based RS Software, where the company’s revenue dropped from ₹375 cr in 2015 to ₹60 cr in 2018 when its largest client Visa which contributed 90% of revenue for RS Software, terminated the contract. Investment without research is as good as gambleĪvoid companies with major revenue company from a single client: If the primary clients walks out so does the fortune of the company. If a stock is down but the fundamentals are positive, its best to hold on or buy moreĪvoid companies that diworsify:Unrelated diversification first of all diverts management’s attention as well as stretches the acquirer’s balance sheet by the acquisition cost(mostly overpaid) or acquirer having to learn about the industry only after acquisition. Will reduce the return to some extent but also will reduce the risks significantly.Įvery company should be looked independently īuy unknown & wait for the market to notice it: Although many influential investors have said this but this strategy is fraught with risk of too much time taken for market to recognize the companies potential or change in market scenario in between, thus causing you loss of opportunity. Its better to track these companies and get in once the market starts talking about it. Example would be Eicher, Prestige, VIP Industries.
Invest in company with Niche: Companies having the ability to increase sales despite increasing the pricing of the product has a lot going into its favor. Don’t invest if might need the money in short term: In that case you need to liquidate your holding & not giving time for your investment to grow won’t reap any benefit.
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