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One Up on Wall Street: How to Use What You Already Know to Make Money In

Page 32

by Peter Lynch


  Lynch Law, 47, 51, 53

  McDonald’s, 13, 14, 72, 75, 88, 95, 193, 214, 246, 261

  bonds of, 71

  competition and, 223–24

  growth of, 128, 223

  p/e of, 170–71

  rising stock prices of, 261

  as stalwart company, 228

  MacKenzie, Spuds, 223

  Mafia, 137

  Magellan Fund, see Fidelity Magellan

  Maine Sugar, 53

  Manhattan, Borough of, 67–68

  Manhattan Fund, 51

  Manufacturers Hanover, 34

  Marcor, 154

  market-capitalization rule, 13–14, 64

  Marlboro, 142, 152, 218

  Marriott, 88, 157, 240, 246

  as fast-growing company, 118

  overpriced stock of, 164

  stock chart of, 168

  Marshall’s, 155

  Martin-Marietta, 141

  Masco Corporation, 134, 164, 261, 280

  Masco Screw Products, 164

  Massachusetts, Commonwealth of, 159

  Mayan mythology, 86–87

  MCI, 26, 135

  Medtronic, 26

  Mellon, Andrew, 67

  Melville, 155–56

  Merck, 34, 88, 124, 155, 220, 246

  stock chart of, 266, 267

  mergers, 135, 279, 284

  see also acquisitions

  Meridian Bank, 190

  Merrill Lynch, 38, 41, 201

  Mesa Petroleum, 39

  MGF oil, 158

  Micron Technology, 204

  Microsoft, 16, 25, 26

  Miller, William, 250

  Miller Brewing, 218

  MMM, 118

  Mobil Oil, 154

  Monday effect, 282

  money-market funds, 30, 62, 72

  advantages of, 69–70

  interest rates of, 69–70

  stocks vs., 69–70, 88

  Monsanto, 142, 211

  Montgomery Securities, 158

  Montgomery Ward, 154

  Ms., 51

  multibaggers, 32–33, 118

  municipal bonds, 68

  Murdock, David, 279

  mutual funds, 10, 31–32, 51, 59, 65, 96, 135

  early 1980s boom of, 102

  regulations of, 63–64

  returns of, 76

  NASDAQ, 21

  Nash Motors, 71

  National Broadcasting Corporation (NBC), 109

  National Convenience, 54

  National Health Care, 158

  Natomas, 134

  Navistar, 145, 146, 230, 264

  NBTY, 26

  Neff, John, 56

  Nelson’s Directory of Investment Research, 136

  Nestlé, 279

  Newhall Land and Farming, 125

  Newhall Ranch, 125–26

  Newsday, 141

  newsletters, 32, 38, 81

  Newton, Isaac, 51

  New York Stock Exchange, 37, 125, 144, 153, 208

  frequency of trading on, 79, 281

  trading hours of, 278

  New York Yacht Club, 50

  Nifty Fifty, 22

  Nikkei average, 55, 278

  Nixon, Richard M., 277

  Noble, George, 212

  Nucor, 90, 110

  NutraSweet, 211

  Nynex, 135

  Odyssey Partners, 279

  oil services industry, 151, 264

  One Potato, Two, 158

  OPEC, 277

  options, 270–73, 280

  cost of, 271

  expiration of, 271–72

  as insurance, 272–73

  put, 273

  Orion Pictures, 96

  OshKosh B’Gosh, 193

  over-the-counter exchange, 279

  Owens Corning, 34

  Pacific Telesis, 135, 213

  Pampers, 107–8, 198

  Pan Am, 89

  Paramount, 96

  Paramount Famous Lasky, 71

  patents, 141

  Paychex, 25, 26

  PBS, 40

  Pebble Beach, 40, 102, 125, 140, 209

  Penn Central, 128, 134

  as asset-play company, 126, 209

  bankruptcy of, 122, 207

  book value of, 207, 209

  as turnaround company, 122, 124, 213

  Pennzoil, 205

  pension funds, 59, 64

  pension plans, 217

  People, 60

  People Express, 42, 89, 269

  Pep Boys, 59, 95–96, 131, 145, 190, 192, 214

  Pepsi-Cola, 284

  p/e ratio, see price/earnings ratio

  percent of sales, 198

  Perot, Ross, 14, 170

  Petrie, Milton, 248

  Phelps Dodge, 34, 187

  Philadelphia Electric, 288

  Philip Morris, 129, 214, 246, 281

  growth, history of, 217–18, 261

  Kraft bought by, 133

  negative-growth industry and, 152, 217–18

  stock chart of, 262–63

  Photronics, 24

  Pickens, Boone, 257, 279

  picks and shovels strategy, 14

  Pic ’N’ Save, 59, 95, 110, 192

  Piedmont Airlines, 42, 269

  Pier 1 Imports, 36, 193, 247

  Pizza Time Theater, 158

  plastics, 119, 133

  Polaroid, 49, 98n, 171–72, 254, 259, 274

  portfolios:

  diversity of, 59–60, 239, 240

  insurance for, 272–73

  minimizing risk in, 241

  multibaggers and, 32–33

  rotating stocks in, 242–43

  size of, 40, 239–41

  stop orders and, 244

  Postum, 71

  Potter, Beatrix, 194

  Premark International, 134

  Prepaid Legal Services, 26

  pretax profit margin, 220–21

  Priam, 158

  Price, Michael, 56

  Price Club, 153, 268

  price/earnings ratio, 165–69, 199

  dot.com stocks and, 12–13

  of finance companies, 200

  growth rate and, 199, 218, 219

  high, 165–69, 170–71

  interest rates and, 172

  levels of, 169, 170–71, 172

  meaning of, 169

  overpricing of stocks and, 168, 171–72

  relativity of, 170

  of stock market, 172

  Primerica, 281

  Pritzkers, 257

  Procter and Gamble, 107–8, 109, 129, 187, 198

  earnings of, 217–18

  as stalwart company, 112, 115, 118

  stock chart of, 115

  products, demand for, 142, 254

  profit margin, calculation of, 220–21

  Radice, 89, 208–9

  raiders, 284

  see also acquisitions

  Ralston-Purina, 112, 118, 129, 162, 207

  random-walk hypothesis, 52

  Ranger Oil, 53

  Raymond Industries, 212

  RCA, 71, 72, 264

  real estate:

  advantages of, 77–80

  houses and, 77–80

  recession of 1981–82, 86

  recession of 1990, 23

  Reebok, 193

  Reichmanns, 256, 279

  Reliance electric, 154

  Remington Typewriter, 71

  reports, analysts’:

  on Internet, 16–17

  see also S&P reports

  reports, of companies, 194–97

  see also annual reports; balance sheets

  Reserve Fund, 69

  Resorts International, 275

  restrictions, trade, 64

  Retin-A, 108

  Reynolds Metals, 106, 187

  Rite Aid, 281

  Robitussin, 142, 209

  Rockefeller, John D., 66, 204

  Rogers, Jimmy, 56

  Rogers, Will, 54

  Rukeyser, Louis, 279

  Safety-Kleen,
132, 133, 137, 145, 159

  sales, percent of, 198

  S&P reports, 17, 21, 27, 69, 74, 123, 136, 170, 184, 197, 199, 238

  Santa Fe Southern Pacific, 126, 210

  Sara Lee, 37

  savings accounts, 69

  savings-and-loan stocks, 17, 54

  savings bonds, U.S., 69

  savings rates, U.S., 285

  Sceilig Hotel, 28, 29

  Schlumberger, 13, 34, 98, 100, 201

  SCI Systems, 160

  Scotty’s, 268

  Scudder, Stevens and Clark, 65

  Seagram, 212

  Searle, 211

  Sears, 59, 62, 110, 223

  Securities and Exchange Commission, 64, 143

  Sensormatic, 161, 223, 229–30

  Service Corporation International (SCI), 35, 36, 58, 116, 137–38, 139–40

  service sector, U.S., growth of, 283

  7-Eleven, 42, 54, 59, 181

  Seven Oaks International, 62–63, 64, 66, 131

  Seven-Up, 218

  shares:

  buybacks of, 144–45, 153, 157, 197

  insider buying of, 135, 142–43

  insider selling of, 143–44

  see also companies; stock

  Shearson, 58

  Shelley, Percy Bysshe, 184

  Shoney’s, 116, 131, 164, 168, 261

  Shop and Go, 54

  shorting stocks, 273–75

  Siliconix, 24

  Singer, 134

  Singleton, Henry E., 144

  Smith, Morris, 127

  SmithKline Beckman, 97–98, 99, 100, 110, 141, 187, 266

  Smith Labs, 157, 158

  Sorg Paper, 51

  Soros, George, 56

  Southland, 54

  Southmark, 207

  Southwestern Bell, 135

  Spectrum Surveys, 136

  Spielberg, Steven, 96

  spinoffs, 133–36, 159

  splits, 34n

  Sprague Tech., 134

  Sprint, 135

  SPUD, 158

  Squibb, 281

  SS Kresge, 280

  SSMC, 134

  Staples, 25, 26

  Star Wars, 163

  Steinberg, Saul, 256, 257

  Sterling Drug, 108, 187

  stock, indexes, 280

  stock charts, 98n, 112, 164

  of Avon, 166

  of Bristol-Myers, 116–17

  of Chrysler, 147

  of Con Ed, 206

  of Dow Chemical, 165

  of Dreyfus, 103

  of Ford Motor, 120–21

  of Genesco, 156

  of Home Shopping Network, 150

  of Houston Industries, 113

  of The Limited, 168

  of Marriott, 168

  of Melville, 156

  of Merck, 267

  of Navistar, 146

  of Philip Morris, 262–63

  of Procter and Gamble, 115

  of Shoney’s, 168

  of SmithKline Beckman, 99

  of Wal-Mart Stores, 114

  stock market:

  breaks in, 246

  bullish vs. bearish, 22–23

  cause and effect in, 50

  distrust of, 48, 73

  fluctuations of, 29–30, 82

  individual stocks vs., 89–91

  interest rates and, 85

  Japanese, 55, 278

  in 1980s, 278

  of 1987–88 vs. 1929–30, 22, 282–283

  in 1990s, 9, 10

  in October, 1987, 29–30, 69, 86, 278, 280, 282

  October, 1988 recovery of, 30

  overvaluation of, 90

  p/e ratio of, 172

  predictability of, 84–88

  preparedness for, 86–87

  random-walk hypothesis of, 52

  as stud poker game, 74–75, 76

  theories of, 52

  trading hours of, 278

  turnover in, 281

  volume of, 281

  weak, 33

  world events and, 276–80, 283

  see also investment; stocks

  stocks:

  annual gain of, 72, 85

  approved lists of, 59–60

  average return of, 237–38

  bargain, 261–64

  blue-chip, see blue-chip stocks

  bonds vs., 69–70, 88, 112, 237

  cash flow and, 214

  charts of, see stock charts

  choosing, 95–97, 98, 231–33; see also investment

  classification of, 110–27

  comebacks of, 264

  common misconceptions of, 258–69

  conservative, 265; see also blue-chip stocks

  diluting of, 145

  dividends and, see dividends

  dot.com, see dot.com stocks

  efficient market hypothesis of, 52

  falling of, 259–60, 269–70

  fluctuations of, 29–30, 82

  frequent trading of, 238–39

  hot, 149–52

  initial public offering (IPO) of, 159

  insider buying of, 135, 142–43

  insider selling of, 143–44, 180

  institutional ownership of, 55, 57, 136, 142–45, 179

  Internet and, 10–12

  length of ownership of, 112, 115, 266

  market vs., 89–91

  money-market funds vs., 69, 88

  overpricing of, and p/e ratio, 168, 171–72

  portfolios of, see portfolios

  public attitude toward, 47–48, 73

  real estate vs., 78–80

  rising of, 260–61, 269–70

  risk of, 71–76, 80

  shorting of, 273–75

  summary evaluation of, 227–33

  whisper, 157–59, 280

  see also companies; investment; stock market

  stock tables, 165–68

  Stop & Shop, 59, 128, 163, 261

  stock, return of, 33

  stop orders, 244

  Storer Communications, 101–2, 256

  street lag, 57–60, 101–2

  Student Loan Marketing, 247

  Subaru, 33, 34n, 36, 58, 95, 115, 251, 260

  Sullivan, D. George, 49, 50

  Sunshine Junior, 54

  Sun World Airways, 158

  Superior Oil, 154

  Sweeney, Thomas, 133

  Swift and Co., 71

  switch funds, 281

  synergy, 156–57

  Taco Bell, 36, 89, 90, 163, 181, 190, 243, 284

  history of, 118

  Tagamet, 97–98, 100, 141, 187, 266, 271

  takeovers, 135, 240

  see also acquisitions

  Tambrands, 35–36, 37, 95

  Tampa Electric, 128

  Tampax, 35–36

  Tandon, 160, 191

  Tandy, 134

  taxes:

  breaks of, 213, 214

  deductions of, 78, 285

  dividends and, 19

  exemptions of, 78–79

  loss carryforward of, 126, 213, 257

  profit margin and, 220–21

  savings and, 285

  shelters of, 279

  Teamsters union, 66

  tear sheets, 136

  Telecommunications, 126–27

  Teleco Oilfield Services, 212

  Teledyne, 72, 134, 134n, 145, 246

  telephone companies, 135–36, 205, 213

  Televideo, 42, 158, 191

  Temple Inland, 134

  Templeton, John, 55

  tenbaggers, definition of, 32–33

  10-year financial summaries, 196–97

  Texaco, 205

  Texas Air, 129, 224–26

  Texas Instruments, 128, 230–31

  textile industry, 188–89

  Theragenics, 24

  Thom McAn, 155

  Three Mile Island, 75, 123–24, 206, 255

  Tiffany, 155

  Time, 131

  Time, Inc., 134, 231

  Times Mirror, 141, 155

  Tisches, 1
55

  Tobias, Andrew, 239

  Tom Brown, 151–52

  Tonka, 134n

  Toys “R” Us, 33, 42, 56, 124, 133, 153, 159, 192, 247, 268

  growth of, 248

  trade deficit, U.S., 284

  trade restrictions, 64

  Transamerica, 134

  Transunion, 134

  Treasury bills, 70

  Treasury bonds, U.S., 68

  T. Rowe Price New Horizons Fund, 57

  Trump, Donald, 257, 279

  TRW, 201

  Tsai, Gerry, 51

  Tupperware, 133

  Twain, Mark, 186

  Twentieth Century-Fox, 125, 140

  Tyco Labs, 48

  Tylenol, 142

  UAL, 160, 211–12

  Underwood, Neuhaus, 58

  unemployment, in U.S. vs. Europe, 23–24

  Unilever, 279

  Union Carbide, 124, 133

  Union Oil, 98, 104

  Union Pacific, 126, 210

  unions, 59, 63, 66

  Uniroyal, 190, 288

  United Airlines, 211

  United Drug, 71

  United Inns, 176

  US Gypsum, 134

  U.S. Industries, 155

  U.S. Leather Preferred, 71

  USPCI, 212

  U.S. Steel, 109, 276

  US West, 135

  USX, 109, 217

  Value Line Investment Survey, 17, 136, 143, 170, 184, 197, 199, 222

  Vanderheiden, George, 137

  Vector Graphics Microcomputers, 158

  Vercoe & Co., 57

  Vicker’s International Holdings Guide, 136

  Vicker’s Weekly Insider Report, 143

  Victor Talking Machine, 71–72

  Vietnam War, 50, 52

  Viskase, 133

  Volvo, 36, 70, 212, 251

  Vonnegut, Kurt, 60

  Vulcan Materials, 141

  Wall Street:

  caution of, 59–60

  lag of, 57–60, 95, 101–2

  standard industry classifications of, 59

  see also stock market; stocks

  Wall Street Journal, 17, 38, 77, 143, 167

  Wall Street Week, with Louis Rukeyser, 279

  Wal-Mart Stores, 12, 33, 59–60, 66, 129, 219, 247

  as fast-growing company, 112, 114, 118

  stock chart of, 114

  Wang Laboratories, 101

  Wards, 153

  Warehouse Club, 153, 268

  Warner Communications, 247–48

  Washington Post, 141

  Washington Public Power Supply System, 72

  Waste Management, 110, 137, 145, 246, 281

  Weinberg, Harry, 256

  Welch, Jack, 18

  Wendy’s, 223

  Wesray, 279

  Westernbank/Puerto Rico, 26

  Westin Hotels, 211

  West Point-Pepperell, 90, 188–89

  Wexner, Leslie, 57

  Wharton College, 52

  What’s Wrong with Wall Street, 281

  whisper stocks, 157–59

  White, Weld, 57

  Wilson, Robert, 275

  Winchester Disk Drives, 38–39

  Windex, 62

  Wojnowski, Tom, 194

  Woodfield Mall, 57

  Worlds of Wonder, 158

  W. R. Grace, 34

  Wright Aeronautical, 71

  Xerox, 62, 63, 64–65, 88, 152, 160

  Yom Kippur War, 277

  York Int., 134

  Zantac, 98

  Zapata, 269

  Zion’s Bancorp, 26

 

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