Major Stock Categories

The Major Stock Categories:

Slow Growers (Cash Cows): utilities, railroads, banks, financial companies

AT&T (T), Verizon (VZ), Duke Energy (DUK), ExxonMobil (XOM), Union Pacific Railroad (UNP), Bank of America (BAC), Bank of Montreal (BMO), JPMorgan Chase (JPM), Bear Stearns (BSC), Goldman Sachs (GS)

Medium Growers (Stars): Large established companies that continue to grow at a moderate pace.

Coca-Cola (KO), Procter and Gamble (PG), Colgate-Palmolive (CL)

Fast Growers (?): smaller aggressive companies with growth estimates above 20% a year (Most will have very high P/E’s). A lot of tech companies can be found here.

iROBOT (IRBT), 1-800 Flowers (FLWS), Baidu (BIDU), Google (GOOG),

Cyclicals (Boom and Bust): autos, airlines, tire companies, steel, chemicals, defense.

Ford (F), Honda (HMC), Toyota (TM), Delta Airlines (DAL), Michelin Group (ML), Alcan (AL), Dow Chemical (DOW), Allied Defense Group (ADG).

Turnabouts (Nightmare to Love Affair): Normally established companies with turbulent times. If they can turn things around huge stock movements can occur.

Magna International (MGA), General Motors (GM)

Asset Plays (Finders Fee): Railroads usually land rich, may have mineral and timber rights that the market is unaware of.

Canadian National Railway (CNR.TO), Union Pacific Railroad (UNP)

What is the Bottom Line?

It does not matter which Major Stock Category an investment falls under. A successful investor will always need to answer to the best of his or her ability the 5 most important stock investment questions:

1. Why this company?
2. Why now?
3. What return is expected?
4. Over what period of time?
5. What could turn this into a mistake?