1. Those of us who ask little of life, get little. Those who ask much, get much, but those who ask for too much get nothing.
  2. If you don’t buy what has to be sold, you never really need to sell anything.
  3. The top 4 criteria
    1. It must be small.   ( Sheer size mitigates growth )
    2. It must be relatively unknown.  ( Popular growth stocks are very likely to perform, but one has to pay for expected growth too much in advance )
    3. It must be a unique product that does an essential job better, cheaper and/or faster than before or provide a new service with great and long continued sale increases.
    4. It must have a strong, progressive, research minded management.
  4. Look for stocks that professional managers like, but are not sure of.
  5. Unless a company that is operating in a foreign country is conducting itself so that people of that country are better off net, after the company has realised its profit, than they would be if they had nationalised it and ran it themselves, the company is living on borrowed time.
  6. Stay with your most successful stock investments as long as they are increasing their earnings.
  7. Try to be associated with people whose self interests are almost parallel to yours.  Therefore it is probably more important to see who is talking, rather than what he is talking.
  8. To make money in stocks, you need to have vision to see them, courage to buy them and patience to hold them. Patience is the rarest of the three.
  9. Far more money can be made by good stock selection, than by good market timing.
  10. Many stocks could have been bought at 52 week highs for many years and still turn out 100 to one winners. All one has to do is identify them and stick to them.
  11. Focus only on multi-bagger ideas, ignore the 100% profit opportunities.
  12. Consider every sale, a confession of an error.
  13. When looking for the biggest game, never ever, shoot at anything small.
  14. A problem, well-defined is half solved.
  15. Do not count losses in trading opportunities as loss in profits. The shorter the time one has to hold the stock before it is sold, the more palpable the error in buying it.
  16. In bull markets, correcting mistakes often means taking profits, despite the STCG tax.
  17. The biggest problem in correcting errors in the market is that stocks look best when they are at the peak and not so great when they are at the bottom.
  18. The ability to foresee is rare and the ability to continue to hold the same buying rational when the stock drops for no apparent reason, is much rarer. Therefore we find it less attractive than before, though it should appear more attractive.
  19. A great deal of investing is one par with a fish biting an inedible spinner simply because it is moving.
  20. All good stocks rise and keep rising, but not everything that is rising is a good stock.
  21. The notion that cash is safe and stocks are unsafe is a fallacy. Inflation loss is real.
  22. Another fallacy is that avoidance of risk is more important that seizure of opportunity. Opportunity can reward you 100 fold, risk on the other hand can only make you loose 1x of your capital.
  23. Never for a non-investment reason should one take an investment action. Such as:
    1. My stock is too high.
    2. I needed to set off STCL.
    3. My stock is not moving. Others are
    4. New management.
    5. New competition.
    6. I have already made 100 times profit.
  24. If you think something is attractive in the market, buy it. If it falls lower buy more. These differences may be the ones that make 60x instead of 40x, but it is not worth missing the opportunities all-together.
  25. Even if one knew what the stock market is going to do, it will still be more profitable in just keeping your head down and continue to stock pick.
  26. The more successful one is at market timing, the greater is the temptation to rely on it and thus miss much greater opportunities of buying right and holding on.
  27. Most deception is bad, but self deception is worse because it is done to such a nice guy 🙂
  28. The shortest route to making money in the market is to buy gold stocks when nobody likes it. The only problem is that good stocks seldom have friends.
  29. When you say good stock, most people think of earnings, but the company can also have assets that are earning nothing at the moment. Great assets are potential earning power.
  30. Rather than current ratios, use statistics to back up vision and foresight. Do your research and have faith in it.
  31. Patience is a virtue, have it if you can, seldom found in a woman, almost never in a man.
  32. It is more important to be right, than to be quick.
  33. What one buys in the stock market is 3/4 times more important that when one buys in the market.
  34. Sometimes some stocks are just “triumphs of lethargy” and nothing else. Here foresight has no relevance.
  35. Even if the near term outlook is bad, just continue to hold on.
  36. A man does not have to be able to lay an egg to tell a good one from a bad one.
  37. The only way to make more money than the going rate of return on capital is to buy stocks whose values are not that apparent to people. The past is there for every one to see and when a stock has performed in the past, and is likely to do so in the future, you can make money off it, but outstanding returns are unlikely.
  38. My advice to buy right and hold is to counter unproductive activity, not to recommend putting them away and forgetting them.
  39. If a company grows at 20% for the next 6 years, it will grow 6x in the next 10 years, and 9,100x in the next 50 years. Try to imagine if the company can grow that big. A large factor is also the current size of the company, which will help determine that.
  40. When you pay for a stock you are not only paying for average growth, but more importantly for superior growth over the future. Therefore you have to evaluate the company in a size 5-6 times its current size, after 6-8 years and check if it still makes sense.
  41. You can almost win any argument, if you are allowed to make any assumptions.
  42. Don’t listen to opinions, unless you are also given an insight into the assumptions made for making those opinions.
  43. In investing one always deals with probabilities and possibilities, and no certainties.
  44. Risk is an essential element in the quest for capital gain. Don’t be dismayed by a loss. Recognise it as one of your costs on the way to a net gain.
  45. A perfect track record can almost certainly mean that you are also letting a lot of good opportunities pass you.
  46. There is no system, philosophy that will keep an investor from making mistakes or keep him harmless when he is wrong. We never risk our money, unless the odds are largely in our favour, our inescapable losses should therefore look small compared to our profits.
  47. One of the most persistent illusions of the business of investing is that information is absolutely vital. Given that assumption, every trade needs a buyer and seller, and if both relied on the same information that the company is giving out, there will hardly be the quantum of trades that persist in the market today. Therefore, assuming that both sides of the trades are made by institutions, its almost certain that opinions on the stock matter way more than common or rather secret information.
  48. The fact without the truth is false. Always correct.
  49. When you read a paper in the morning, never forget that your homework has only just begun.
  50. Look at opportunity ratio while evaluating. If you can gain 100 points by risking a loss of 10, the odds are 10:1. This again isn’t the complete story, its just the payoff. Equally important is the chance that of the relative gain to the loss.
  51. In the stock market as in poker, one must only bet when the odds are heavily in your favour.
  52. If the price is already down by discounting the worst, there is very limited downside risk, focus on the upside and take a call.
  53. All values are relative in all aspects. In a kingdom of the blind, a one-eyed man is a king.
  54. Don’t scoff at dividends when you are looking at capital gains as, the route through highest capital gains is often though valuation based on dividends.
  55. Wise investors don’t buy stocks just because they are going up, they buy is because the current cost will seem extremely cheap in the years to come, and dividends yields of the future prices may still be 1-2%, but will be large on the investment price.
  56. The greatest gains in the market have been made by simultaneous increase of earnings along with increase in PE.
  57. Increased earnings is just arithmetic progression, both are almost geometric progression.
  58. PE vs simple earnings increase
    1. For a stock to grow 100 times on increased earnings if the PE is same.
    2. If a PE grew 4x, the company would only have to increase earnings 25x.
    3. The same is also a double edged sword when PE falls, in fact it is much worse as if the PE halves, the earnings have to double just to keep the prices constant.
  59. There is no such thing as a correct PE or a correct relative PE. The story, assumptions and risk reward are the most important.
  60. If a stock has gone up 50x after you bought it and with a significant risk, if it can double, it will yield a 100x return. You can run incredible amounts of risk for a reward of that size.
  61. In the stock market as in poker, the money tends to move from stupid to intelligent hands.
  62. Fallacies in using the PE independently:
    1. Earnings are not as easily comparable as prices. In many ways purely comparing earnings is like comparing cows vs horses.
    2. Quality and composition of earnings are vital in drawing effective comparisons by using the PE.
    3. Just PE can be as deceptive as drinking martinis.
  63. Just as fastening a seatbelt can save your life, scrupulous attentions to the change in quality of earnings can save you your fortune.
  64. The best safeguard against the sleigh of hand booking keeping is to have nothing to do with it or with the men who practise it.
  65. The greatest mistake of the public is to pay attention to the prices instead of the value.
  66. Earning are way more manipulated than stock prices.
  67. But for the gullible, there would be no manipulators. In Africa, where there are no antelopes, there are no lions.
  68. Stocks are bought and sold on the market because both, the buyer and seller hope to benefit by their actions.Neither are there to do another a favour.
  69. Technical analysis is not an alternative to fundamental analysis, it is at most to be used as a tool for an entry and an exit after a finalised decision to buy or sell.
  70. Basic economic principals
    1. All market value is in the mind.
    2. All laws made by men, can be changed by men, will be changed by men ass soon as people decide that they would be better off if the laws are changed.
    3. No one’s title or right to property is worth anymore than his fellow creatures willingness to defend it.
    4. If a company seems to be operating in ignorance or defiance of these 3 principles, don’t stop and figure – RUN.
  71. There are 3 approaches to investing
    1. Psychological
    2. Statistical
    3. Spiritual
  72. Remember that a man who will steal from you, will steal from you.
  73. Ask yourself if the company you plan to invest into is going to make the world a better place. If no, avoid it like the plague.
  74. No matter how profitable, stay away from men, companies and ventures that are based on defrauding rather than helping their customers.
  75. Most fraudsters are not so selfish as myopic, not so much greedy as stupid.
  76. When morally derelict men reach the top of corporations, and stay there for a a few years, the evil done by them lives on.
  77. It is thus unwise to be too excited about an a quick turnaround in any organisation whose management has displayed a lack of moral principle.
  78. When you invest into a “selling to a bigger fool” venture, you might be the biggest fool, and just don’t know it yet.
  79. In racing there is a huge difference between the 1st, 2nd and 3rd prize. Investment returns are no different.
  80. Bet on individuals and organisations fired by the zeal to meet human wants and needs, imbued with enthusiasm over solving mankind’s problems. Not just ones that are there for the profit.
  81. The corporate economist thinks of making the company bigger than more profitable.When you see a company delivering a low return on capital and continuing capital expenditure year on year to improve market share – you probably are dealing with a corporate economist.
  82. The last emotion to die in humans is pride.
  83. Check if the Main man has people smarter than him or is he always hogging the limelight. Generally people who share limelight with CFO’s and other heads tend not to be egomaniacs.
  84. Inflation is the cruelest tax.
  85. If ones head is held under water until he agrees, it is extortion, not an agreement.
  86. All power corrupts. Absolute power corrupts absolutely.
  87. In no civilisation has the value of currency increased, ever.
  88. Interest is the price of time.
  89. Debt is never bad. What one does with it determines the goodness or the badness of the debt.
  90. Hunting ground for 100-1 winners
    1. Inventions that can make you do what you always wanted to, but could do in the past. Cars, Airplanes, Televisions, Smart phones etc.
    2. Things that simplify or make existing tasks easier, faster or at a lower cost – Computers, earth moving machinery.
    3. Processes or equipment that allow you to maintain quality, while reducing or eliminating the labor required for it. – disposable syringes, frozen foods, xerox.
    4. New and cheaper sources of energy – kerosene, atomic generated electricity etc.
    5. Doing old essential jobs organically. using neem as pest control instead of pesticides.
    6. Methods or equipment for recycling.  – water purification
    7. Transportation on land that can be done without the wheel or fire.
  91. Four categories of stocks that have yielded 100 baggers
    1. Recovery from depressed, rock bottom economic cycles.
    2. Change in supply demand ratio for a commodity, reflected in a sharply higher commodity price.
    3. Leverage in capital structure, in long periods of expanding business and inflation.
    4. Result of continuous investment of re-investing earnings at high rates of return on capital. — MOATS
  92. The basic reason very few of us have made 100-1 on an investment is that most of us haven’t even tried to do so.
  93. Understand the difference between earning and earning power.
    1. Sales growth
    2. Profit Margins
    3. RoE
    4. RoCE
    5. Book value build up
  94. What mathematics cannot do, common sense sometimes can.
  95. In Alice in Wonderland one had to run fast to stand still, in the stock markets, one who stands still can really make money fast.

3 replies on “100 to 1 by Thomas Phelps, in 95 points.

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