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Know the Type of Company You are Investing In

category

It is important to do some research on the companies we are investing in. After research either by reading through the annual reports or understanding the management, we often discover different companies have different characteristics.

Peter Lynch classify most companies into six categories.

1. Fast Growers

Fast growers are small companies that are growing fast. Growing fast means they are gaining market share faster than other players in the same industry.

2. Slow Growers

Slow growers are large companies that are old, matured and grow extremely slow. The risk is low investing in these type of companies however we do not expect huge returns on these type of companies.

3. Stalwarts

Stalwarts are large, established companies with steady growth. They are not impact much during economic downturns and recession. Being a dividend investor, this is my favorite category.

4. Cyclicals

Cyclicals companies are those that are influenced by cyclical changes. For this type of companies, the sales and profits rise and fall in a predicable fashion. Timing is important for investing into this type of companies.

5. Asset Plays

Asset Plays refer to companies whereby their asset is worth more than the company itself. The asset may be in the form of cash or something the company own whereby it may be valuable in the future. E.g. an island whereby there may be oil reserves.

6. Turnarounds

These are companies that are struggling to survive but show signs of recovery and turnaround. It is risky to invest in these type of companies but we can expect exceptional returns if the company manages to turn around.

My Stock Porfolio

Let me try classify the stocks in my portfolio into the six categories. Some may overlap.

Category Company
Fast Growers Sheng Siong, NeraTel, Kingsmen Creatives
Slow Growers AustNet Services, M1, ComforDelgro, Starhub, ParkwayLife REIT
Stalwarts ST Engineering (Defense/Aerospace)
Cyclicals The Hour Glass, Cambridge Industrial Trust, CapitaMall Trust, Lippo Indonesia Retail Trust, Far East Hospitality Trust, Frasers Commercial Trust, Keppel REIT, Mapletree Commercial Trust, OUE Hospitality Trust, Soilbuild Business REIT, Suntec REIT, Boustead, Kingsmen Creatives
Asset Plays None
Turnarounds Boustead, Kingsmen Creatives

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