While there are reflections of contrarians and value investing philosophies as well in his approach. To summarize, I would state that Lynch’s approach to investing was catch them young approach (early stage investing. But, where the fundamentals are promising, patience is often rewarded”. You begin to think everybody else is right and you are wrong. He states “It takes remarkable patience to hold on to a stock in a company that excites you, but which everybody else seems to ignore. Or, The Stock has gone down, so I must be wrong (You are not right or wrong just because others are willing to take the prices up/down!!) No point wasting time on this thought!) The Stock has gone up, so I must be right. Look at all the money I have lost: I did not buy it (It was someone else’s money. That is the reason, I always say that hold is a frivolous recommendation).
#ONE UP ON WALL STREET BY PETER LYNCH PDF FREE#
Otherwise, just sell and free up capital. Question to ask is whether it is a good business at the current price to buy? If yes, hold. (New bottoms may surprise you!) If it has gone up this much already, how can it possibly go higher (New heights may surprise you!) It is so low priced stock, what can I lose (probably, entire invested capital!) When it rebounds to Rs. If it has gone down this much already, it can’t go much lower (It may go, probably, to 0) Stock has already hit bottom. Lynch advises to suspend some of the following common thoughts from the mind: Distrust diversifications, which usually turn out to be diworseification. It takes years, not months, to produce big results. Book value in Balance Sheet could be quite deceptive – Debt is real number and assets may be worth less than the amount they appear for in balance sheet. Hottest stocks in the hottest industries are better avoided. It reminds me what Warren Buffett said “We like mundane businesses with ultra slow rate of change”. Other features are – simple, serving to basic necessity, has clearly defined competitive advantage/niche. “Any idiot can run this business” is one characteristic of a perfect company. Big companies have small moves and small companies have big moves. Hold as long as thesis is in play, irrespective of highs or lows of the market.
Always write the thesis for buying a business (Just a para covering rational behind decision). By putting stocks into categories, one would have better idea of what to expect from them. “In other words, I continue to think amateur as frequently as possible.” Segregated businesses in various categories – Slow growers (very large corporations), Stalwarts (Large corporations with very strong pedigree), Fast growers (small, aggressive, new entrants growing at 20-25% per annum), Recession Protection (Education, Medical etc.), Turnarounds, Cyclicals and Asset Plays. “The stocks I try to buy are the very stocks that typical fund managers try to overlook” (off the radar stocks – we may call it contrary approach to investing!!). Visiting stores and testing products/services is one of the critical elements of analysts’ job. We look at the same thing and ignore the same thing”. It reminds me what Strategy Guru Garry Hamel said once – “Most of us are blind the same way. When 10 engineers/doctors suggest the same solution to a problem, that is the way to go but, when 10 financial experts suggest the same stock, stay away from that (probable, that is too hot!). Financial experts are different from experts in Engineering and or Medical fields. Look at the developments around, search for products/services attracting and wowing customers! May be there lies a potential opportunity for investment. Common sense approach to investing is being observant. It also means, when one (buys from) sells to desperate, one would always (buy cheap) sell expensive. Some of the important messages are: When one (buys) sells in desperation, one always (buys expensive) sells cheap. Lynch has very generously shared tons of his experiences and investment philosophy, in simplest of language, while managing the money at Fidelity from 1977 to 1990 (famous Magellan fund), with all of us. Simplicity, lucidity and the flow of book is absolutely amazing. I would start with stating that the book is a great example of common sense approach to investing. Thought of penning down take aways from the book. One up on wall street by Peter Lynch Just finished reading one of the greatest books on investment “One up on wall street” by renowned money manager Peter Lynch.
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