Peter Lynch in his book One up on Wall Street: How To Use What You Already Know to Make Money in the Market has shared his thoughts on categorizing employees.
Now that you’re thinking about it, you might want to put yourself in one of the six categories of stocks we’ve already gone over. This could be a halfway decent party game:
- People who work in secure jobs that pay low salaries and modest raises are slow growers, the human equivalents of the electric utilities such as American Electric Power. Librarians, schoolteachers, and policemen are slow growers.
- People who command good salaries and get predictable raises, such as the middle-level managers of corporations, are stalwarts: the Coca-Colas and Ralston Purinas of the workforce.
- Farmers, hotel and resort employees, jai alai players, summer-camp operators, and Christmas tree sales-lot operators who make all their money in short bursts and then try to budget it through long, unprofitable stretches are cyclicals. Writers and actors may also be cyclicals, but the possibility of sudden increases in fortune makes them potential fast growers.
- Ne’er-do-wells, trust-fund men and women, squires, bon vivants, and others, who live off family fortunes but contribute nothing from their own labor are an asset plays, the gold-mining stocks, and railroads of our analogy. The issue with asset plays is always what will be left after all the debts are run-up, and the creditors at the liquor store and the travel agency paid off.
- Guttersnipes, drifters, down-and-outers, bankrupts, workers who’ve been laid off, and others in the unemployment lines are all potential turnarounds, as long as there’s any energy and enterprise left in them.
- Actors, inventors, real estate developers, small businessmen, athletes, musicians, and criminals are all potential fast growers. In this group, there’s a higher failure rate than there is among stalwarts, but if and when a fast grower succeeds, he or she may boost income tenfold, twentyfold, or even a hundredfold overnight, making him or her the human equivalent of Taco Bell or Stop & Shop.
- When you buy a stock in a fast-growing company, you’re really betting on its chances to earn more money in the future. Consider the decision to invest in a young Dunkin’ Donuts such as Harrison Ford, as opposed to a Coca-Cola type such as a corporate lawyer. Investing in the Coca-Cola type seems a lot more sensible while Harrison Ford is working as an itinerant carpenter in Los Angeles
Adapted from One up on Wall Street: How To Use What You Already Know to Make Money in the Market by Peter Lynch
