8.9 Don't over complicate

Identifying a good stock

Do you need a PhD in finance to recognize a good company? Peter Lynch, in his book, discusses a time when his wife drew his attention to a great product with phenomenal marketing potential. Hanes was test marketing a product called L’eggs – women’s pantyhose packaged in colorful plastic egg shells. Instead of selling these in department or specialty stores, Hanes put the product next to the candy bars, soda and gum at the checkouts of supermarkets - a brilliant idea since research showed that women frequented the supermarket about 12 times more often than the traditional outlets for pantyhose.

The product was a huge success and became the second highest-selling consumer product of the 1970s. Most women at the time would have easily seen the popularity of this product, and Lynch’s wife was one of them. Thanks to her advice, Lynch researched the company a little deeper and turned his investment in Hanes into a solid earner for Fidelity, while most of the male managers on Wall Street missed out. The point is that it’s not only the so-called experts but average every day people who can see such wonders too. If you see a local company expanding and doing well, dig a little deeper and ask around. Who knows but it may be the next Hanes or an Infosys or Reliance. You must be wondering now about how get hold of such data. Start reading newspapers and industry-specific articles. There are many websites that provide updated reports and statistics about Indian industries. Visit the following website which gives you more informative analysis on Indian industry: http://www.ibef.org/industry.