Step 11.Kompanii, violating the rules

Step 11.Kompanii, "violating the rules"

Note
on the company, "violating the rules," and small-cap companies
"Companies," violating the rules ", bring investors the highest return achievable on the stock market. Company," violating the rules, "a source of inspiration and driving force for all business people, whoever they were - managers, professionals or the Planning Department ordinary performers. "Violation of the rules" - a special seasoning of capitalism and its most delicious and necessarycomponent. " - The Motley Fool's Rule Breakers, Rule Makers
Warning: Investing in "breaking the rules" - the lot of the most daring and experienced investors. New to investment matters should be aware of the risks associated with this investment strategy.
Invest in "breaking the rules" implies a conscious assumption of a large number of risks and at the same time - an opportunity to get the highest return available on capital markets. Shares "break the rules" should be just a part of any portfolio - and investors have warned that they should be willing to lose money invested in these companies.
Well, is not very inspiring, is not it? Perhaps you will look at the performance of our portfolio, "violating the rules." This portfolio is completed in 1998, an increase of 199%, compared to a very solid growth in the S & P 500, made up almost 29%. During its existence (from August 1994), the portfolio has grown to more than 1100% (as of September 13, 1999). During the same period the growth of the S & P 500 was 194%.
We are, first and foremost, we hasten to admit that no hope for eternal continuation of these excellent results and would be very surprised if a year like 1998, have ever repeated. However, we think that we can offer you some tips on how to select the outstanding shares of stock of thousands of small companies on the market. Further, in a very concise form, we give six main characteristics of the companies' violation of the rules. "
1. The company should be first and the best in the important and growing industry. In other words, be the first among the companies making scissors for lefties, is not enough. Industry scissors for lefties is not a "developing": you do not know? It refers to a very mature and does not undergo any significant change in the near or the distant future. On the other hand, e-commerce is now a growing industry, and Amazon.com - the best and dynamic company in this category. Similarly, in the field of direct sales of computers to "violate the rules," the company treated Dell Computers. Company Starbucks for some time was the first and most dynamic in the field of elite varieties of coffee.
2. The company must demonstrate a permanent advantage over their competitors due to business development, patent protection, an apparent leadership or weak competition. Examples of these companies can serve as a Wal-Mart (increase in net profit by 25% during most of 1980.), Amgen (patent protects your medicine for many years) and Microsoft (clear leadership, which is strengthened by the decision of Apple Computer does not license its technology).
3. The market should recognize the company, "violating the rules" and give her a generous price for the shares. A good indicator of this is the relative strength rating of 90 or higher.
4. Look for companies with good management and strong support. For example, a steel company Nucor, headed by Ken Iverson (Ken Iverson), which has become a world-class production after the introduction of revolutionary changes in the process of steel production. Or Scott Cook (Scott Cook), whose emphasis on services to consumers has led to the success of a giant in software for personal finance Intuit. You should also take into account such factors as the availability of support from the company: for example, eBay supports the management of Starbucks and Sun Microsystems.
5. In addition, it is important that the company had more and more popular among consumers. Again, note the Starbucks and the fact that the name recognition of the company is much higher than the names of their competitors, such as ... umm, how they are called ... (Get the idea?).
6. We also believe that a good sign when the financial means of the media, not making out the whole picture, called company is overvalued. (Perhaps the most reliable indicator is the inverse of the leading editor of Barron's. When Barron's asked about America Online: "The price will fall soon?" - This is very good. When Barron's recommends: "To sell immediately" - just great.)
Just as in the case of companies, "set rules", the best place to analyze whether you are interested company to "violate the rules," is a discussion board, "infringing the rules," where investors 24 hours a day to share their thoughts on investments in such companies. If you want to read more and learn more about the issues of investment in "breaking the rules," read the first chapter of The Motley Fool's Rule Breakers, Rule Makers. Another good place to get ideas, is an overview of e-business site The Motley Fool. Company, "violating the rules," in no case are not limited to the Internet sector, but this company in this sector often "break the rules," and some of them can provide great investment opportunities for investors who have a strategy of "breaking the rules."
If you are thinking about how to join the list of investors, "breaking rules", you are advised to make appropriate action only part of your overall investment strategy. Good nutrient mixture should consist of stock, according to the approach chosen Dow-dividend shares, "defining the rules," and several "break the rules", adding pepper in all of this dish.
The attractiveness of investing in small capitalization stocks
Regardless of whether or not you decide to seek emerging companies for investment strategies according to "break the rules", you should give serious attention to the fact that it include in its portfolio companies a few small-cap. Why we are in favor of investing in "small capitalization"? There are several reasons, but perhaps the most serious of which is that it gives the individual investor the opportunity to win in one move, "the wise". You see, because of the size of most mutual funds, their method of organization, as well as strict regulation by the Commission on the Securities and Exchange Commission, for managers of mutual funds is a huge challenge to establish any strong position on the shares of small capitalization. To buy a position that is large enough to make any changes in the performance of the Fund as a whole, they must purchase a minimum of 10% or 20% of the shares of small capitalization companies (they are often forbidden to the guidelines for the fund). Before they can do it, they should contact the Securities Commission. A contact does not make sense if they are already stretched to these shares her arm and inflated above an attractive price, buying the first 5% of the company.
The fact that the "big people" can not play games with the shares of "small cap", is a huge advantage for individual investors who have the ability to quickly buy up promising companies - and do it before they would get up to institutional investors. This is very beneficial, because when institutional investors such as mutual or pension funds finally have the opportunity to buy stocks that interest them, they make major purchases, buying large batches at once and by increasing the stock price to its demand. In addition, small-cap companies are often very large block of shares owned by executives of the company. Thus, a large part of their personal well-being depends on the share price, and you can be assured that they will work hard to raise the price of its shares.
The last (and arguably the best) reason to buy stocks of growing small-cap companies is that they grow up - and sometimes quite quickly. Small companies are much more comfortable position to expand its business, compared with their larger competitors. A rapidly multiplying profits often lead to a rapid increase in stock prices.
Disadvantages of shares of companies of small capitalization
However, small-cap stocks is not for everyone. You must be very well versed in the value of balance sheet indicators, and, besides, you would not hurt to pre-cook a few years in the total investment pot. Newcomers of the shares of better abstain. You will not be able to reach space heights without preliminary training, and do not try investing in a "small capitalization" as long as you are not broken off teeth on the stocks of large and medium-sized companies.
You should also refrain from investing in stocks of "small cap" (and in any action, in fact), if you want to earn extra money this way for distribution of its debts or for making an important purchase. The funds you invest in small capitalization stocks, you should be prepared to lose.
Another unfavorable factor is time, or rather lack of it. Find a good small-cap stocks is costly work and then even more attention after you make your purchase. If you do not have enough time, energy or desire to engage in their portfolio, better invest the money according to Dow-dividend strategies, or choose low-cost index fund.
And the last reason to stay away from small-cap growth companies is your personal risk aversion. Shares of "small cap" substantially more risky than large. If one thought about the fall of 5% per day causes you to colic, better take care of your stomach. Everyone his own attitude to risk, and there are no reasons why you have to make investments that bring you discomfort. There are excellent investment strategies Dow, which will bring you good revenue and not make empty the home kit.
So, now that you've plugged the belt small-cap stocks, go to Step 12, which discusses the more "advanced" investment ideas.