Hi, thanks for checking back in!
Peter Lynch says that one should avoid the hot industry. This is usually the sector that's stocks shoot up %150 in a few months. The problem with these stocks, is that unless you are a professional you will not be able to time when the stock is going to collapse.
For Example, (a personal one) this past year I bought some shares of Suntech Power Hldgs (STP). I bought it at 34 bucks and it skyrocketed in under six months to 90 dollars. The next thing I knew, it was back down to $35. I t was definitely an exciting ride, but could have definately ended in a much worse way.
Lynch does not say to never invest in the hot industry. If there is a company in a the hot industry with great fundamentals a nice balance sheet and moderatly growing sales it could defenatly be a ten bagger. But remember, the ten baggers are the stocks that grow at a healthy 25% a year pace for a decade.
Please check in next week for lesson #3!
1 comment:
I sympathize with ur story. I once invested in cocaine inc, run by a really top notch drug dealer- a good guy. the stock was at 5$, but after a week it went to 105$. howvere, the next week the company closed unexpectedly, and i got no money. to this day i can never figure out why the police arrested him, so i learned from here to just never trust hot stocks- period. keep up the good advice!!
ps. just a joke!!
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