CHAPTER 6

CATEGORIES, INDUSTRY GROUPS, AND CATALYSTS

WHEN I’M CONSIDERING a stock for purchase, the first thing I do is determine the type of situation I’m dealing with. In the context of the nature of the business and the industry in which a company operates, I want to develop an expectation of its prospective earnings growth and find out whether those prospects are widely recognized and therefore discounted in the current stock price. Categorizing companies is a good way to gain perspective and organize your thoughts about a particular stock. It will help you establish the type of company you’re considering relative to others in the market so that you can make a judgment about where the stock is in its maturation cycle or curve. Companies don’t ...

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