cabincruser (81.09)

One Up On Wall Street review Chapter 8

April 14, 2011 – Comments (0) | RELATED TICKERS: TLK , CSE , CGA

One Up On Wall Street

................Chapter 8.. The Perfect Stock , What a Deal!

He begins the chapter with his oft quoted "When somebody says,  'Any idiot could run this joint', that's a plus...because sooner or later ant idiot probably is goin to run it."

This is one characteristic of the perfect company and he lists thirteen favorable attributes of the perfect company in which to buy stock.
Some differences are subtle and i attempt to dilineate some of the nuances.

1. It sounds dull-or even better, ridiculous.
2. It does something dull.
3. It does something disagreeable.

So we look for a boring business with a silly name that does something gross.
He says, for example that " ...any company that uses a k where there ought to be a c is worth investigating." Safety-Kleen for example goes to auto repair places and cleans greasy parts...day after day...week after week...part after part

Does Telkom Indonesia (TLK) count ?

4. It's a Spinoff.
-"the spinoffs usually have high balance sheets and are well prepared to succeed as independent entities."
Hmmmm this section made me consider the CSE REIT spinoff as this Income Investor vetted pick became less of a dividend and more of a banking company back in 2008 .

5. The institutions don't own it , and the analysts don't follow it.
6. The Rumors Abound: It's involved with toxic waste and/or the Mafia.
7. There's something depressing about it.

So we look for a waste management company that hasn't been visited by an analyst for years (and has some whispers about you know).

or how about a vertically integrated one stop shop funeral company that owns funeral parlors, cemeteries, flower shops, funeral product-and -supply manufacturing centers, and casket distribution centers.

and lately CGA seems to fit into this classification, eh .

8. It's a No-Growth Industry
He more means a non-thrilling, no news kinda' company that doesn't attract alot of attention. He states, "That's where the biggest winners are developed."

9. It's got a Niche
He mentions Rock pits and aggregate businesses and the like that need be close to delivery points.
Drug companies and chemical companies , unusual businesses and also some brand names have become as good as niches like Coke.

10. People have to keep buying it.
11. It' a user of technology.

Like grocery stores that upgraded to scanners (Tech) to cut costs.

12. The insiders are buyers.
"...corporate insiders are net sellers, and they normally sell 2.3 shares to every one that they buy."
" Insider selling usually means nothing, and it's silly to react to it."

It is suggested to keep an eye on the buying and don't sweat any usual selling.
(This CSE link shows the '% Held by Insiders' in the right column)
http://finance.yahoo.com/q/ks?s=ATVI+Key+Statistics

13. The Company is Buying back Shares.
"The most common alternatives to buying back shares are (1) raising the dividend, (2) developing new products, (3) starting new operations, and (4) making acquisitions."

So, those are Peter Lynch's most important 13 favorable attributes of the perfect company.

Ahhhhh the perfect company: a boring, depressing, flying under the radar on some unsubstantiated rumor, gross, modern, spin-off business with a silly name, that has a slowly growing re-usable niche, where the insiders and company are buying the stock.

Fool on , cabincruser
long of KO , CGA , CSE , TLK