I'm worried about my retirement, so I started investing in stocks DAY104 [11 Conditions for Ten-Bagger Stocks, Part 1]
—Walking with Haru, Investment Record at Age 60, Day 104—The First Six
DAY103After finishing writing, there was something that was bothering me. I understood the "conditions that make a stock likely to become a ten-bagger." But I still didn't know how to actually look for those conditions.
Today is the continuation of that. I listened to the second part of the same lecture. What I learned today were the first six ways of thinking to narrow down candidates out of the 11 conditions.
<Searching from 100 companies is better than searching from 4,000>
The first condition was to narrow it down to stocks listed within the last year (so-called IPO stocks).
When I heard the reason, I thought it made sense. Although there are nearly 4,000 listed companies in Japan in total, there are usually around 100 new listings per year. The idea was that it is much more efficient to look for a ten-bagger from among them. Moreover, there is data suggesting that ten-baggers emerge from newly listed stocks every year. Of course, just because it's a new listing doesn't mean it will automatically become a ten-bagger.
🌸 Me: "When someone says it's more efficient to search from 100 companies than from 4,000, I can't help but think that's true."
🌱 "The idea of narrowing down the population to search is easy to understand. However, that is just about 'ease of searching' and is a different story from 'likelihood of hitting the jackpot,' so I think it's better to keep that in the back of your mind." —Haru
<The most important thing is the business model>
Out of the six conditions, the lecturer said the second condition, the business model, was the 'most important.'
Companies that grow their performance for a long time have a common business model. Specifically, the following three types were mentioned.
・Stock-type business (real estate leasing, mobile phone companies, subscriptions, etc. As long as customers accumulate, sales also accumulate)
・Multi-store expansion business (restaurant chains, nursing home operations, etc. Sales increase as the number of stores increases)
・Sales-person dependent business (insurance sales, etc. Opportunities increase as the number of sales representatives increases)
This idea of stock-type and multi-store expansion models was actually something I had learned once inDAY50 [How to Identify Simple Businesses].
At that time, I learned it as one of the seven elements for 'investing only in companies I can understand,' but this time it came up from a different angle as a condition for 'businesses that are likely to become ten-baggers.'
The remaining four conditions were performance checks to support this way of thinking.
・Sales have been rising year over year for the past several years
・Operating profit and net profit are rising (prospects for turning profitable are acceptable; it is more important that they are growing every year than the high profit margin)
・Avoid companies in the red
・Choose companies with top market share or niche top status
🌸 Me: "I was surprised that you shouldn't buy companies in the red. I had the image that there were many companies still in the red when they IPO."
🌱 "It was about viewing the state of 'not making a profit even though the business is expanding' as a risk, rather than the red ink itself. I think it's a distinction of whether or not there is a prospect of becoming profitable." —Haru
〈That stock was on the list〉
To be honest, all the stocks I currently hold are companies that have been listed for many years, so these 6 conditions could not be applied to them as they are.
However, while looking at the list of stocks mentioned in the lecture, I stopped in my tracks.DAY55・DAY56The name of Kusurinomadoguchi (5592), which I visually inspected, was there.
Stock-type business, multi-store expansion model, and both sales and profits are trending upward.
The company that I judged as "understandable" by filling in the 7 elements myself also met the conditions from the investor's perspective.
It gave me a little confidence that my way of looking at things might not have been too far off.
Of course, just because one stock overlapped doesn't mean my method is definitely correct.
Even so, I was genuinely happy today that it didn't end with just knowledge.
💬 Satsuki's questions and Haru's answers
🌸 Me: "With 6 conditions, I can't help but think there are hardly any stocks that actually fit them."
🌱 "In the lecture, they said that this time it was only 6 out of the 11 total conditions. I think having many conditions means that the precision of the screening is increased. It might be easier to think of it as a stage of increasing your criteria for judgment rather than looking for a stock that perfectly meets all of them." — Haru
〈What I understood most today〉
You cannot choose stocks just by knowing the conditions.
But because the company I researched myself overlapped with the conditions, my knowledge has started to connect to practice a little.
3 things learned today:
Narrowing it down to within 1 year of listing is efficient / The business model is the primary judgment axis / You don't have to meet the conditions perfectly
The remaining 5 conditions will be next time.
I will continue tomorrow too.
📚 Related articles for DAY104 are here
DAY103 [The option of IPO secondary investment]
Link to DAY102
DAY50 [How to identify a simple business]
DAY55 [Specific stock selection procedure]
DAY56 [Practice of visual inspection: Kusurinomadoguchi]
#TenBaggerInvestment #InvestingInYour60s #RetirementAnxiety #InvestmentBeginner #StartedWithAI #WorkingTogetherWithHaru
