Key Points Summary of 'How to Select Growth Stocks'

If a company is still in its startup phase, investors can only speculate—based on its business plan—about potential problems or strengths it might encounter; such speculation is far more difficult than observing established, mature companies. The success rate of truly outstanding companies emerging from the startup stage is extremely low. Young, startup-oriented companies are often led by one or two individuals exceptionally talented in operations, yet they inevitably lack other indispensable capabilities. They may be inventors or production experts but completely unaware that even the best products require sophisticated marketing. Investors generally cannot convince these individuals that they themselves lack certain skills, nor can investors point out where to find the talent needed. Startup companies should be left to professional investment institutions, which possess strong management expertise and can provide timely support as soon as weaknesses emerge during the company’s early development. Do not overlook high-quality stocks traded over-the-counter. Third, do not buy a company’s stock simply because you like the tone of its annual report. Fourth, do not assume that a high P/E ratio necessarily means future earnings growth has already been fully priced in. Fifth, do not quibble over trivial savings. Once you have identified a stock you believe in, avoid using limit orders when buying; instead, purchase at the market price. Paying slightly more is negligible compared with the profits you would forfeit by failing to acquire the stock. Chapter 9: Five Additional ‘Don’ts’ for Investors. First, do not overemphasize diversification. Placing eggs into too many baskets inevitably means many eggs end up outside the best baskets—and once you’ve placed your eggs, you cannot possibly monitor every basket continuously. Buying shares of a company you do not thoroughly understand is often far riskier than insufficient diversification. If you hold stocks in highly cyclical industries, their prices will swing dramatically with economic conditions; in such cases, a relatively high degree of diversification is necessary to achieve balance. If your investment universe is limited to solid, well-established large-cap companies—and you select growth-oriented stocks among them (e.g., Dow Chemical, DuPont)—aim initially to hold at least five such stocks. Note, however, that the product lines of these five companies should overlap only minimally. When investing in earlier-stage startup companies, allocate no more than 10% of your total capital to any single such company. When investing in highly risky small-cap companies, allocate no more than 5% of your total capital to any single such company. Second, do not hesitate to buy stocks under the shadow of war. Throughout the 20th century—with only one exception—the U.S. stock market plunged sharply each time a major war erupted anywhere in the world. Yet, after each actual war concluded, most stock prices rose significantly above their pre-war levels—even though fear of war had previously driven prices down. Over the past 22 years, at least ten international crises raised fears of large-scale war; each time, stock prices fell sharply amid those fears—and rebounded strongly once the fears subsided.

What constitutes a good stock? What constitutes a good business?

For example, if you wish to invest in stocks of the hydropower industry, first understand the industry’s growth prospects, overall operational profitability, and corporate operating costs. Only after clarifying these points—and gaining deep familiarity with the enterprise—should you proceed to buy. Second, assess the company’s background and credentials. If you are a beginner investor, pay close attention to the company’s background and credentials. Prioritize state-owned enterprises (SOEs) and central SOEs—large-scale enterprises backed by the state. Such firms not only operate under standardized governance frameworks and possess competitive moats, but also benefit from strong state support. Consequently, they naturally gain access to greater resources and opportunities. Partnering with such enterprises enables you to earn substantial returns annually. Holding their stocks long-term eliminates concerns about delisting or profitability—and their share prices tend to rise steadily over time. This sense of security is unmatched by other types of enterprises. Third, examine the company’s profitability. Once you understand the company and confirm its strong credentials, focus next on its profitability: Is annual profit stable? Does the company distribute earnings to shareholders? Can it sustain year-on-year profit growth? These critical metrics can all be found in the stock’s financial analysis. Study its financial statements and data closely—especially DuPont analysis. Once you master interpreting such analyses, your understanding of the company becomes clear and comprehensive.

Mirae Asset Global Investments Buys 35,143 Shares of DuPont de Nemours

7 hours ago

Mirae Asset Global Investments purchased 35,143 shares of DuPont de Nemours worth approximately $4.6 million in Q3. The transaction follows DuPont's earnings beat, reporting $2.09 EPS and $1.87 billion in revenue.

MarketBeat

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Oak Thistle LLC Acquires 46,908 Shares in DuPont de Nemours

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Robeco Institutional Asset Management B.V. Decreases Stake in DuPont de Nemours, Inc.