One Up On Wall Street – Peter Lynch

In this post, I will present the top 5 takeaways from One up on Wall Street, the bestselling book by legendary investor and manager of the Fidelity Magellan mutual fund, Peter Lynch.

Why the Individual Investor Can Beat the Pros?

  • Pros have many disadvantages compared to an individual investor
  • Size: more capital = less opportunities
  • Lot of explaining: 25% of time of analysts are spent explaining to various stakeholders about why they made certain decisions
  • Capital depends on clients: pull back during bear markets and put back during bulls => therefore money manages have too little to investor during bear markets, and too much during bull markets

If You Like the Store, Chances are You Love the Stock

  • We have certain industries, products and services that we know more about than the average person does
  • Wall Street might not know about it yet

6 Categories of Stock Investments

  • Slow Growers: large and typical in mature industries; growth in 1-4%/year => invest for dividends
  • Stalwarts: earnings growth rate of 10-20% per year, should sell if they make quick 30-40% gain
  • Fast Growers: Growing above 30% a year; can it keep up the growth?
  • Cyclicals: Revenues rise and fall with the business cycle; example is the automotive industry
  • Turnarounds: Potential fatalities
  • Asset Plays: Undervalued assets; real estate, patents, natural resources, subscribers, company losses

10 Traits of the Ten Bagger

  1. Company name is dull or ridiculous
  2. It does something dull
  3. It does something disagreeable
  4. Institution don’t own, analyst don’t follow
  5. It’s depressing
  6. Industry isn’t growing
  7. Got a niche
  8. Reoccurring revenues
  9. Insiders are buying
  10. It’s buying back shares

5 Traits of the Reversed Ten Bagger

  1. Hot industry
  2. The “next” something
  3. Company is diworseifying: acquiring companies in unrelated industries
  4. Dependant on a single customer
  5. It’s a whisper stock