Focus on picking no more than five quality companies

In an age of stock picking, you don’t have to spend too much time looking at stocks.

All you have to do is focus in the right direction, focus on picking no more than five quality companies, and hold on to them.

It’s enough to take your fortune to the next level.

You also have a good chance of beating institutional investors. As Peter Lynch, one of the most famous fund managers, put it: with a little hard work on stocks, the average investor can become an expert on stocks and be just as good at picking them as the experts on Wall Street.

Stock selection is to select the company, select the company must first select the industry. Because the industry is the track where the company is, is the basis of the company’s survival, but also determines the company’s pattern. So I will start from the industry point of view, combing out the main players of the high-quality track. If you wait long enough, you’ll know which industries will be more successful in the future, what their underlying logic is, which major players are in these premium industries, and what their business models and competitive advantages are.

A good industry must meet two criteria:

1) the market needs to be big enough to last.

Whether the economy is good or bad, people can not live without food, clothing, living, sickness and death, these are the eternal “Golden Racetrack.”.

2) the market is growing fast, or even explosively

The stock price always reflects the future performance of the company. If demand stays stable but doesn’t grow, there’s no way the share price will go up.

Highways, for example, may seem like a good business to charge for, but there are only so many cars passing through each year, and they dare not raise prices at will. Then the stock won’t go up.

But in the field of science and technology, key technological breakthroughs, the introduction of new products, often can stimulate people’s demand, access to explosive growth, stock prices will soar.

Taken together, it is easy to see three broad areas in which a doubling tends to occur:

Consumption, technology and medicine.