on April 14, 2004
If you are going to pick your own stocks (I buy individual stocks only with money I can afford to lose, the rest is in real estate, mutual funds, and bonds), this book, by one of the best stock pickers of all time, should be considered mandatory reading for you.
Peter Lynch does not give you a mechanical, step-by-step process to pick the winners, but his stories give you an insight into how he thinks, and learning to think like Peter Lynch is bound to help you become a better stock picker.
Mr. Lynch does not promise that you will get rich by picking a quick series of ten-baggers. He makes it clear, I think, that investing in individual stocks is not meant for those people who don't have a strong stomach and are not good at doing research.
Mr. Lynch recognizes that for many people their best investment, in the end, turns out to be their home. His view of the investment world is broader than that of many other stock market experts.
P.S. An additional caution of the risks involved in picking individual stocks to invest in: A long time after Peter Lynch wrote this book, I read that he lost a significant amount of money by investing in an upscale carpet business that did not pan out as anticipated. Even the greatest track record does not guarantee future results. So beware! No matter how good you are, and how strong your stomach is, you will have to absorb some big losses sooner or later. Peter Lynch did.
Peter Lynch was a star manager of Fidelity's flagship mutual fund in the late 1970s and 1980s, gaining well deserved recognition for his outstanding performance record, and even more recognition for his excellent writing. One Up On Wall Street offers an excellent, entertaining, educational tour through the very vast world of investing, always with an eye to the novice investor. Originally published in 1989, just before his retirement, one would expect many of the examples to be dated and on occasion no longer in existence, and that is true, but unfortunately some of the insight that Lynch gives and advice that he offers is also dated as the faster paced world of computers and instant information. The issue isn't that one can't substitute a computer for the reference book in Lynch's advice, rather it's that the common sense thinking and basic research is available to everyone, everywhere at all times, so much of the advice itself comes across as quaint or dated. Still, Mr. Lynch presents his advice extremely well, with interesting anecdotes, a wealth of experience, and plain language.
Readers could do much worse than this as a starting point, but will want to continue on with some more up to date advice for their next book.
on November 29, 2015
Very practical book for any kind of investors.
I bought this book few years ago directly from the book store, I have read the book few times as a bible and now, I bought it for two friends of mine as a gift.
It will help any kind of investor for the simple reason that Peter Lynch describes the investing approaches used by him during his time as a portfolio manager of Magellan fund in a very simple and understandable manner without getting too much into financial details, but just to the level to help to understand the most important criteria for finding good companies that will likely outperform the market and thus to mitigate the risk of losing money investing in a low quality but probably highly advertised companies.
One of the things I liked the most in his book was that he shows finding good companies in a bit different prospective where the most important factor is not the professional financial skill set but rather the good sense and sound judgment that could easily be quantified with supporting financial data.
Another thing I liked also was that unlike many other authors, Peter Lynch separated the stocks into different groups and hence he showed every group characteristic, stock selecting criteria, price target, management in the portfolio, etc.
Based on the book and according to his different groups stock finding criteria, I was able to build my own stock searching screeners, and surprisingly for me, a lot of the stocks I have been finding, are very high quality stocks in terms of profitability, low debt, available cash, earnings etc., that usually outperformed the market for years and will likely continue to do so if the companies manage to keep up with the constantly changing market conditions and maintain similar or better financial yearly and quarterly results as in the past.
I found also that many of the stocks I have been finding according to his criteria, could be seen also as recommended by Zacks, MorningStart and other Financial advisor's institutions.
I am planning to show some of the stocks I have been selecting based on Peter Lynch' criteria on my web (stocksavvy net) so you could have better idea for the different criteria I am using and for the potential results as well.
Other websites like Gurufocus are also using Peter Lynch wisdom to find good stocks, but at the end as he says, if one uses just a common sense to find good companies, it would not be a big surprise at the end to outperform the market and the professional fund managers and thus helping to have sufficient funds upon retirement or even doing this for living.
on April 6, 2008
Peter Lynch, the legendary money manager of Fidelity Magellan Fund, shares his investing principles in this book. This book is for both casual investors and professionals because it contains many timeless investing principles.
The book is divided into three sections: Preparing to Invest, Picking Winners and The Long-Term View. The second section is the most valuable one as Lynch talks about what he looks for in a great investment, as well as what to avoid. Chapter 13, Some Famous Numbers, is especially useful for novice. Lynch explains the key financial numbers/ratios and why they are important. Those are very helpful when conducting analysis of individual companies. Chapter 15, The Final Checklist, summarizes the second section. Every investor should not be buying stocks without going through the checklist.
Beginners would develop many proper habits of sound investing including focusing on companies rather than stocks and separating stock tips from the tipper. It is a great book for beginners and less so for professionals because some of the things in the book are rather basic. However, investors who master these basic principles would be very well rewarded from the stock market.
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on November 6, 2015
First book I have ever read about stock investing and this is the perfect read for people dipping their toes into investing. The book is not technical but very anecdotal where Lynch gives off a lot of personal examples to showcase his investment philosophies. This is a very nice read for people with no prior knowledge of investing. Lynch provides many sortable categories including what to look for in his mind, and how to categorize stocks based on their major characteristics. Peter talks about his background, his upbringing, and how a general public individual can beat the street through carefully watching everyday trends. This book lacks depth in technicals of analyzing stocks such as valuation models, pricing strategies, etc., but is very good at giving a general screening guideline for people looking to enter a stock. Overall, a great simple read by one of the greatest minds of investing, definitely recommend for people who are looking to get into the stock market.
on March 6, 2004
I think this book is a very good book for people that want to buy good growing companies that they might do business with, in fact in this book Mr. Lynch recommends buying stock in companies that you do business with. For instance if you drink a lot of Mountain Dew you might want to consider investing in Pepsi-Cola.
Peter Lynch was the manager of the world's largest mutual fund (Fidelity Magellan) also during his tenure that mutual fund was the best performing mutual fund in the world.
Mr. Lynch doesn't give you an exact formula but with careful reading I believe you can determine some of the criteria he used. He also goes into discussion of what criteria he uses to sell a stock. (hint it isn't the same for all stocks)
Here are a few things that Mr. Lynch thinks would make the perfect stock:
1. If it sounds dull or, even better, ridiculous
2. If it does something dull
3. It does something disagreeable
4. It's a spin off
5. The institutions don't own it and analysts don't follow it.
6. The rumors abound: It's involved with toxic waste or the mafia
7. There's something depressing about it
8. It's a no-growth industry
9. It's got a niche
10. People have to keep buying it
11. It's a user of technology
12. The insiders and buyers
13. The company is buying back shares
Overall I think this is a good way to learn about investing in growth stocks that aren't exactly CAN SLIM, and what to hold stocks for a year or longer. I'm not alone this book is ranked 4 and 1/2 out of 5 stars at amazon.com
on February 23, 2004
I borrowed my copy of "One Up On Wall Street" from a friend who is a longtime professional equities investor. He received this gift as recommended reading from a veteran investment analyst he knows. While Peter Lynch has written an easily comprehendible advice book on common stock investing - very much written in layman's terms and without emphasis on industry jargon - the principles he puts forth are fundamental and worth reviewing by anyone, amateur or pro.
Within the 300 pages of this book, Lynch outlines a useful rubric against which all stock selections might be measured. His stocks fall into six categories: Slow Growers, Stalwarts, Cyclicals, Fast Growers, Turnarounds and Asset Plays. Screening, buying and selling advice are outlined for each of these six flavors, although nothing revolutionary (eg., Sell a slow grower when the dividend is unattractive.) He delivers a wealth of the basic analytical tools (well, more like rules of thumb) for stock research, explaining price earnings ratios, the import of tax loss carry-forwards, goodwill accounting, inventories, and other basics of P&L statements and Balance Sheets. It's a pocket guide financial course for those who may have slept through Accounting 101.
Lynch urges stock pickers to do their homework, and suggests the regimen of a "Two Minute" drill, whereby an investor can recite a brief monologue of reasons for selecting a security: Reasons for selection, what the company needs to do to succeed, and pitfalls that stand in the way. Obviously, this is not a book for the technicians or chartists. Nor even speculators, as Lynch reminds the reader that his "ten-baggers" or "forty-baggers" all come as a result of having held at least three to four years.
Quite a bit of the book carries a populist bent. There is plenty of advice to pay more heed to what's happening in the local shopping mall than to investment brokers ("oxymorons"), and to avoid stocks with exotic names or that may have been whispered to be hot. Of course, we've all been aware of this, and we're all wealthy and drinking daiquiris on the beach now, right?
In sum, it is worth the investment of the few hours it takes to swallow this information. At worst, it is an entertaining look at some high-fliers the former Magellan manager scored with, but at the very least it serves as reminder that basics need to be followed, and nothing works as well as solid research, good discipline and old fashioned hard work.
on November 8, 2003
The book starts with the thesis that with some alertness and due dilligence, any lay person from main street can identify some of the very best growth stocks of tomorrow. And do so long before Wall Street analysts start paying attention to them. The rest of the book describes how the author identifies, classifies, and analyzes various types of companies. The power to the average man theme, and author's track record as a money manager are responsible for the book's popularity. Notwithstanding the book's sub-title, in a very self-centred fashion the book revolves arouond the author, not the average man ("You"). The stock analysis part of the book, while sound, is not particularly original.
The author comes across as a bottom up opportunist, not a top down theoretician. In fact he has certain amount of scorn for academic theories. His success seems to come from independent thinking, extra effort, and extra (calculated) risk taking. His portfolio had more small caps, growth stocks, cheap stocks, cyclicals, and turnaround plays than ever so boring S&P500. This would have increased the riskiness of his portfolio. He also boldly went investing in companies that no analyst had looked at before. And he was handsomely rewarded for that. It is also clear that he thought in terms of the whole portfolio, not just individual stocks. I.e. he didn't lose sight of the forest for the trees. I liked his classification of stocks into six categories: (i) slow growers, (ii) stalwarts, (iii) fast growers, (iv) cyclicals, (v) turnarounds, and (vi) asset plays. I also liked his thumb rule that a fair value of P/E ratio is equal to or less than the sum of earnings growth rate and dividend yield.
Author's presentation is mostly anecdotal, and aimed at the amateur/beginner level. Advanced students of finance, quants, and system traders will be sorely disappointed. While he points out that he beat S&P500 by a mile and a half, it is not clear how did he do in risk adjusted terms. Neither am I convinced that his approach will beat the market in every economic climate. After all, US in the '80s and '90s was quite atypical in the history of world financial markets. This book is nowhere as focused or intellectually rigorous as Ben Graham's Intelligent Investor. Neither is it as systematic as John Bogle's books on mutual funds. But as a peek into the thought process of a legendary investor it is extremely interesting.
on March 9, 2003
When looking for recommended stock market investment books, I made a list of books touted by Morningstar [...] as good reading. I selected about 6 books to read, some of them I thought were easy to read & others not so easy, this one by Peter Lynch being one of the former.
If you are like me i.e.
1. Professional financial qualification
2. Many years of hand-on business experience
3. Strongly confident when making initial foray into the market
4. Made some stock market investments
5. Lost more money than gained
6. Suitably humbled by investment experience
7. Looking for an investment strategy
8. Will to adapt & adopt new ideas
read this book.
Peter Lynch inspires one to use his down to earth, common sense approach when selecting stock market investments. "How to Use What You Already Know to Make Money in the Market" on the front cover is described in detail in his book & can be put to PRACTICAL use. Also, he was a top money manager who made plenty money for his investors in his Magellan Fund so he has a track record & is not trying to live off royalties from book sales.
The book is easy to read & not full of technical jargon designed to confuse the un-itiated (or initiated) - an extract from Chapter 2 "To the list of famous oxymoron's-military intelligence, learned professor, deafening silence and jumbo shrimp-I'd add professional investing". Whilst this may seem silly to read in a book on stock market investments, he makes it very clear why top investment analysts, money managers & the like make some spectacularly poor investment choices. He tells you how you can avoid these mistakes. I got so much value out of this book I have read it twice & I am planning to read it again & take notes.
There's so much [stuff] written on stocks & stock market investing out there to read. You will avoid that when reading this book.
on September 18, 2002
Peter Lynch is the one who brought "ten bagger" into mainstream financial parlance. He seems oft quoted. But somewhere, something got lost in the translation. Say "Peter Lynch," and someone might say: "Oh, he's the one that says 'invest in what you know.'" People have taken that to mean that if you like eating donuts, then you buy stock in your favorite donut company; likewise for coffee. That, of course, is a ridiculous oversimplification of what Lynch has to teach. Lynch did not become the famed manager of Fidelity Magellan by just eating donuts. What he is really saying is that you cannot beat the amount of "fundamental analysis" you can do simply by being a frequent consumer of a customer's products, a recognition that investing in stocks is "an art, not a science."
But do not be fooled by the "aw shucks," self-deprecating humor of this Wharton Business School graduate. Read between the lines and you will see that he is not advocating that you throw out everything you ever learned about financial analysis. Reread One Up On Wall Street as a reminder of how important it can be to visit a company, to test and understand its products.
"I don't believe in predicting markets. I believe in buying great companies--especially companies that are undervalued or underappreciated," he says. "Although it's easy to forget sometimes, a share of stock is not a lottery ticket. It's part ownership of a business."
The book is actually a collection of aphorisms on how to look at and consider various situations in which a company might find itself. Many of these rules are so deceptively simple on first reading that they have only recently truly made sense to me after some years of doing diligence on companies. I would actually call this a "principles" book. For instance, Lynch talks about what is perhaps one of the most difficult arts to learn in finance: knowing when to exit out of an investment. And while there are chapters called "Earnings, Earnings, Earnings" and "Some Famous Numbers," clearly they are meant more for retail investors than portfolio managers. You are not going to find a heavy technical discussion. Now and then, however, it is always healthy to review the general rules.