Latest news with #OneUponWallStreet
Indian Express
12-07-2025
- Business
- Indian Express
What the legendary fund manager Peter Lynch would tell Indian investors today
'Invest in what you know.' This phrase is often repeated today, yet at the same time, many investors still chase the next stock that promises quick returns. People want the next ten times return, the stock that will become a big story in a short time. Peter Lynch, one of the most well-known fund managers, built his reputation by taking this simple idea seriously. While running the Magellan Fund from 1977 to 1990, he gave an excellent 29 per cent return every year for 13 years. Under his leadership, the fund grew from about $20 million to more than $14 billion. This made it one of the most successful funds in history. To understand how big this is, think of it this way: $14 billion in 1990, after adjusting for time and inflation (at 4% inflation), would be around $55 billion in today's money. For context, HDFC Balanced Advantage Fund, one of the largest equity mutual funds of India, manages around Rs 90,000 crore (nearly $10 billion). Even many large mutual fund houses in India manage total assets of around $3-5 billion each in their equity funds. Lynch took one fund from a small size to almost three times the size of the biggest equity fund in India today, and he did this more than 30 years ago when markets were much smaller and less developed. But his real strength was not only in these numbers. He believed that any ordinary person can do well in the stock market. He believed that if you observe, trust your experience, and stay patient, you can find good companies before others notice them. Lynch always said that many good stock ideas are right in front of us. They can be found in the shops we visit, in the products we use daily, and in the services we depend on. If you understand a business clearly, believe in its future, and can hold it without checking prices every day, you already have an advantage. Today, when many new investors in India are opening demat accounts and looking for fast profits, Lynch's lessons feel more important than ever. In a market full of tips, he reminds us to look for strong businesses, understand them well, and give them time to grow. In One Up on Wall Street, Lynch said that ordinary people have a natural edge because they are close to real life. He believed that many good investment ideas can be found simply by paying attention to what people buy and use every day. Today, this approach makes even more sense in India. The number of products and services around us has exploded. New brands, new apps, and new shopping habits are becoming part of daily life. By watching these changes closely, you can spot strong businesses before they become market favourites. For example, think about what is always in your shopping bag or what apps you use daily. Are more people buying from DMart because they find it cheaper and convenient? Are your friends switching from foreign beauty products to Nykaa's brands? Do you see young people buying Titan's smart watches instead of only traditional ones? Are most people around you using Zomato or Swiggy more than cooking at home on weekends? These are all signals that a business has strong demand and connects well with consumers. If a company keeps gaining new customers and people come back again and again, it shows strong brand loyalty. This often translates to growing sales and profits, which are key signs of a healthy business. What exactly can a retail investor do? Observe repeat buying: Notice which products your family keeps buying every month without thinking twice. This suggests strong customer loyalty. Check word-of-mouth: Listen to what people recommend naturally to their friends. If a brand is popular without heavy advertising, it has a strong pull. Visit stores or try services: Visit a store to see the footfall yourself. Try using an app or product to understand the quality and service. Look for everyday presence: Brands or services that have become part of daily life tend to have steady growth. Once you collect these clues, make a list of such companies. Then take the next step: study their business models and financial numbers. By starting here, you avoid running behind random tips. You build your ideas based on what you see and trust. As Lynch believed, if you already use and like a product, you are in a better position to understand it than someone who has only seen it on a financial report. Lynch always believed, 'Know what you own, and know why you own it.' He believed that before putting money into any stock, you must understand in simple words how the company earns and what drives its growth. Today, this is even more important. Many new investors in India buy stocks because someone recommended them or because they saw a high past return. They focus only on price movements but do not spend time understanding the core business. This can lead to poor decisions and panic when prices fall. A good starting point is to ask yourself: How does this company make money every day? Who are its main customers? What problem does it solve, and why do people keep paying for it? Does it have something unique (brand, network, technology, distribution) that makes it difficult for competitors to copy? Can it continue to grow for the next 5 or 10 years? For context: Think about… Asian Paints makes money from decorative paints, and it controls the largest distribution network in India. This helps it stay ahead of smaller paint makers. HDFC Bank earns through loans and fees, and it has a strong reputation for safety and service, which keeps customers loyal. Page Industries (Jockey) earns from premium innerwear, and its strong brand image and wide retail reach help it stay a leader. If you can describe a business clearly in one or two lines, you truly understand it. If you cannot, it is better to avoid investing until you learn more. What exactly can a retail investor do? Read the annual report: Start with the first few pages where the company describes its business model in simple words. Check company presentations: Many listed companies share investor presentations online explaining their main products, strategies, and market position. Visit stores or use the service: For consumer companies, use the product yourself or visit stores to understand the customer experience. Ask simple questions: If someone asks you why you bought this stock, can you explain it without using fancy words? If not, you need to study more. When you understand how a company earns and why people keep choosing it, you will feel more confident during market ups and downs. You will hold the stock longer, which is where real wealth creation happens. As Lynch showed, strong returns come not from quick trades but from knowing your companies deeply and holding them as they grow. Lynch warned that many investors fall in love with a company's story but forget to look at its financial health. He always said that behind every stock, there is a real company. To avoid surprises, you must check if the numbers match the story. Without strong financials, even the best-sounding story can collapse when the market sentiment changes. A good company should show: Steady sales growth: This shows that demand for its products or services is real and growing. Consistent profit growth: Profit is what remains after all expenses. Rising profits show that a company is able to manage costs and protect margins. Healthy return on equity (ROE): This tells you how well a company uses its money to generate profit. A higher ROE (usually above 15 per cent) often indicates good management and efficient use of capital. Low or manageable debt: Too much debt can create stress, especially during economic slowdowns. Low debt shows financial strength and flexibility. For context: Think about… Pidilite Industries (Fevicol): It has shown steady sales and profit growth for many years, supported by strong brand loyalty and wide distribution. Nestlé India: It has a high ROE and stable profit margins, thanks to strong brands like Maggi and Nescafé. Bajaj Finance: It maintains strong growth in profits while keeping bad loans under control, which shows quality in lending practices. What exactly can a retail investor do? Look at the last 5 to 10 years of financial statements: Focus on trends in sales, profit, and debt rather than just one good year. Check free cash flow: A company that generates cash after expenses can reinvest for growth or pay dividends. Compare margins: Higher and stable profit margins show strength in pricing and cost control. Use simple ratios: Check ROE, debt-to-equity, and operating margin. These are available for free on most financial websites today. When you look beyond the story and confirm that a company's numbers are strong and improving, you avoid many common mistakes. You become a confident investor, not someone who depends on market mood or social media tips. As Lynch always reminded, 'The company behind the stock is what matters most.' The story can attract you, but the numbers should convince you to invest. Lynch believed, 'The key to making money in stocks is not to get scared out of them.' He believed that more money is lost because investors panic and sell too early than because of actual bad companies. Today, this is even more true in India. With social media, constant news alerts, and WhatsApp groups, it is easy to feel pressure every day. Many investors keep checking stock prices every hour, reading new tips, or following what influencers say. This constant information (or noise) pushes them to act without thinking clearly. The real risk here is that you lose focus on your research and get pulled into decisions driven by fear or excitement. A small fall in price feels like a big problem, and people sell good stocks too early. Or they buy stocks only because they are trending. During the 2020 market crash, many people sold strong companies in fear. But those who stayed invested and trusted the underlying businesses saw these stocks not only recover but also reach new highs later. Similarly, during temporary corrections, some companies have seen price drops many times. Yet, they have rewarded patient investors over long periods because the business fundamentals stayed strong. What exactly can a retail investor do? Check price less often: Once you have chosen a strong company, stop watching daily price movements. Reviewing once a quarter or twice a year is enough. Focus on business updates: Instead of price, follow the company's quarterly results, expansion plans, and product launches. Write down your reasons: When you buy a stock, write clearly why you bought it. Refer to this during market falls to remind yourself of your logic. Avoid short-term predictions: Avoid trying to guess short-term highs and lows. Even experts often fail at this. Stay away from constant tips: Avoid buying or selling only because someone said it in a group or on a video. When you reduce the noise, you give your investments time to grow. You avoid unnecessary stress and mistakes. As Lynch showed, the ability to hold strong businesses patiently is rare but powerful. Most people think that investing success depends on fast action and clever timing. In reality, it depends more on calm thinking and staying still when needed. Lynch believed that you do not need to own dozens of stocks to succeed. He warned against owning too many companies without proper study, a habit he called 'diworsification.' His view was simple: it is better to own a few good companies that you understand well and can follow closely. Today in India, many investors collect stocks like shopping items – a few from tips, a few from social media, and a few from news articles. Soon, they end up with 30 or 40 stocks and no clear reason for holding most of them. This creates confusion and makes it difficult to track each company properly. Instead, building a small, focused list of strong companies forces you to study each one deeply. You know exactly why you own it, what makes it strong, and when to exit if the story changes. However, focus alone is not enough. The second key is patience. Lynch often said that his best returns came from stocks he held for many years. He believed that time in the market, not timing the market, is what creates real wealth. Many investors exit too soon after a small profit, missing the real growth that happens over long periods. What exactly can a retail investor do? Limit the number of stocks: Aim for five to ten strong companies that you can easily track and understand. Write a clear thesis: Note down why you chose each stock, what strengths you see, and what would make you consider selling. Review business progress, not just price: Follow yearly reports and major updates instead of checking price charts every day. Avoid chasing quick profits: Decide in advance that you will hold as long as the business stays strong, even if prices move up and down in the short term. Think like a partner: View yourself as a part-owner in the business, not just a trader of its stock price. When you focus on a few quality companies and hold them patiently, you allow compounding to work. Over time, steady profit growth and reinvested earnings can create far greater wealth than any short-term trading. Lynch showed that real success in investing does not come from doing many things quickly, but from doing a few things carefully and then giving them time to grow. Start with what you see around you. Pay attention to the products and services people use every day. Strong companies often begin right in front of you. Understand the business clearly. Make sure you know how the company makes money and why people keep choosing it. If you cannot explain it in simple words, do not rush to buy it. Let the numbers confirm the story. Look for steady sales growth, rising profits, and low or manageable debt. Good numbers show real strength, not just a nice story. Stay calm and ignore the daily noise. Do not let short-term price swings or market tips push you to act quickly. Focus on how the business is performing over time. Pick a few good companies and hold them patiently. You do not need to own many stocks. Choose a few strong ones you trust, and let time and compounding work for you. Note: We have relied on data from the annual reports throughout this article. For forecasting, we have used our assumptions. Parth Parikh has over a decade of experience in finance and research, and he currently heads the growth and content vertical at Finsire. He holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
Yahoo
18-06-2025
- Business
- Yahoo
Big Profit Stocks on Sale: 3 Picks at Yearly Lows.
If I were to classify my investment style, I would consider myself a contrarian, rather than a value or growth investor. David Dreman first published Contrarian Investment Strategy: The Psychology of Stock Market Success in 1979. It was one of the first books that got me hooked on investing in the 1980s. The other two: The Intelligent Investor by Benjamin Graham and Peter Lynch's One Up on Wall Street. These three books showed me that you could make money investing. Trump Is Giving Tesla's Robotaxis a Leg Up Ahead of June 22. Should You Buy TSLA Stock Now? Dear Nvidia Stock Fans, Mark Your Calendars for July 16 The Trump Family Is Betting Big on Mobile Phones. Should Apple Stock Investors Be Worried? Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now! 'Dreman believed that investors are prone to overreaction, and, under certain well-defined circumstances, overreact predictably and systematically,' Validea's page about Dreman states. 'They typically overvalue the popular stocks considered the 'best', and undervalue those considered the 'worst', often going to extremes in these over- and under-valuations.' Unfortunately, because growth stocks have ruled the roost for most of the past two decades, contrarian investors haven't fared too well. Eventually, Dreman's philosophy will deliver the goods. But I digress. My commentary today focuses on three profitable companies whose stocks hit new 52-week lows on Tuesday. All of them have the potential to deliver outsized returns over the next 3-5 years for investors who are tolerant enough to stay the course. Here's the how and why for each. Thermo Fisher Scientific (TMO) hit its 24th 52-week low of the past 12 months yesterday. The maker of scientific instruments' stock is down 31.3% over this period and is trading at its lowest level since July 2020. Admittedly, I'm not a big follower of healthcare stocks, but it's a well-known name in the sector, so I'm curious what's holding it back. Analysts like it. Of the 24 covering its stock, 20 rate it a Buy (4.54 out of 5) with a mean target price of $554.46, a level it traded at as recently as February. These same analysts expect it to earn $22.32 a share in 2025 and $24.68 in 2026. Its shares trade at 17.5x and 15.8x these estimates. Thermo Fisher's current enterprise value of $175.73 billion is 4.35 times its trailing 12-month (TTM) revenue. Its EV/revenue multiple hasn't been this low since March 2017. As stated in its Q1 2025 press release, the company continues to allocate capital efficiently, spending $4.1 billion on acquiring Solventum's Purification and Filtration business, repurchasing $2 billion of its stock, and increasing its dividend by 10%. Routinely, it generates between $6 billion and $7 billion in annual free cash flow. Expect it to continue buying back its stock until the next phase of growth kicks in. Copart (CPRT) hit its 14th 52-week low of the past 12 months yesterday. The provider of online vehicle auctions for insurance companies, as well as other related businesses such as banks and rental car companies, and individuals, has seen its share price fall by 13% over the past year. However, over the past five years, it has increased by 127%, outperforming the S&P 500 by 37 percentage points. Copart reported Q3 2025 results on May 22. While they were healthy on both the top and bottom lines, investors were more focused on the real or perceived headwinds caused by tariffs, knocking its stock 21% lower in the weeks since. Because it trades at a premium — 28.3 times its 2026 earnings per share of $1.70 — investors felt that might be too much to pay for a company that tariffs could hurt. However, Copart management believes that replacement parts, which are more expensive due to tariffs, will lead more insurers to opt for writing off a car in a collision rather than paying the higher costs of repairing it, converting tariffs into a win for them. Regardless of the tariff situation, analysts still support it, with seven of 12 rating it a Buy (4.00 out of 5), and a median target price of $65, which is well above its current share price, according to MarketWatch. Copart offers a valuable and essential service to its customers. The need, regardless of AI, persists. That's a significant reason why it has delivered an annualized return of 21% since its initial public offering in 1994. It's a keeper. Watsco (WSO) hit its 13th 52-week low of the past 12 months yesterday, and Pool Corp (POOL) hit its 9th 52-week low. I know I said I'd comment on three stocks hitting new 52-week lows. However, both of these companies should be positively affected by climate change, so I included both. In Watsco's case, it helps homeowners and businesses stay cool in the summer and warm in the winter by distributing HVAC (heating, ventilation, and air conditioning) equipment, parts and supplies. It is the largest distributor in the Americas. Pool, as its name implies, distributes pool equipment and supplies from 445 sales centers across North America, Europe, and Australia. It is the world's largest wholesale distributor of its kind. Its products also help customers stay cool. Both businesses provide products and services that, although not impossible to live without, are pretty essential. In Watsco's case, summer in America gets stinking hot. Air conditioning is a must-have, especially for senior citizens. As for Pool, sure, you can let your pool get dirty, but eventually, you're going to sell your house, and when you do, its products will help make the sales process work like a charm. Of the two, Pool's business has more recurring revenue, but Watsco's high-ticket items make up for this. The former has grown its annual revenue by 9.4% on a compounded basis, compared to 9.9% for the latter. That said, Pool's revenues have returned to pre-COVID numbers. In 2022, its revenues hit a record high of $6.18 billion. As of March 31, the TTM revenue was $5.26 billion, approximately the same as in 2021. Meanwhile, Watsco's revenues have grown from $5.05 billion in 2020 to $7.58 billion as of March 31. Analysts have mixed feelings about both stocks. I like both of them because climate change isn't going away. They're profitable and generating significant cash flow, which allows them to buy back shares during times of weakness, such as the current situation. It will pass. Don't pass on WSO and POOL for the long haul. On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
