Everyone should read One Up On Wall Street at least once.
Peter Lynch not only achieved a legendary 29% CAGR over 13 years.
His ability to turn complex investing concepts into stories is remarkable.
I reread the book recently & I'm still blown away.
Here are my notes:
Peter Lynch not only achieved a legendary 29% CAGR over 13 years.
His ability to turn complex investing concepts into stories is remarkable.
I reread the book recently & I'm still blown away.
Here are my notes:
1. Smaller companies make bigger price movements.
There is a longer growth runway for smaller companies.
βThe size of a company has a great deal to do with what you can expect to get out of the stock. How big is the company in which youβve taken an interest?β
There is a longer growth runway for smaller companies.
βThe size of a company has a great deal to do with what you can expect to get out of the stock. How big is the company in which youβve taken an interest?β
2. The Peter Lynch Playbook
After classifying the companies based on size, Lynch will place them into one of the following categories:
β’ The slow growers
β’ The stalwarts
β’ The fast growers
β’ The cyclicals
β’ The Turnarounds
β’ The Asset Plays
Let's dive into each one!
After classifying the companies based on size, Lynch will place them into one of the following categories:
β’ The slow growers
β’ The stalwarts
β’ The fast growers
β’ The cyclicals
β’ The Turnarounds
β’ The Asset Plays
Let's dive into each one!
The Slow Growers
Grows between 2 to 5%.
Just slightly faster than GNP growth.
They usually pay generous & regular dividends.
Not his favorite group of businesses.
But he invests in some to anchor the portfolio during recessions or drawdowns.
Grows between 2 to 5%.
Just slightly faster than GNP growth.
They usually pay generous & regular dividends.
Not his favorite group of businesses.
But he invests in some to anchor the portfolio during recessions or drawdowns.
The Stalwarts
Huge companies that grower between 10 to 12%.
Unlikely to go bankrupt & can survive recessions.
Lynch like to buy this group of companies during drawdowns .
As they will drop to their lower range of PE ratios & snap back after drawdowns.
Huge companies that grower between 10 to 12%.
Unlikely to go bankrupt & can survive recessions.
Lynch like to buy this group of companies during drawdowns .
As they will drop to their lower range of PE ratios & snap back after drawdowns.
The Fast Growers
This is Lynch's favorite hunting ground.
Where he can find the 10 to 100 baggers.
This group grows between 20 to 25% a year.
He looks for fast growing companies with good balance sheet and are making substantial profits.
This is Lynch's favorite hunting ground.
Where he can find the 10 to 100 baggers.
This group grows between 20 to 25% a year.
He looks for fast growing companies with good balance sheet and are making substantial profits.
The Cyclicals
This group of companies sales & profits rise and fall in a relatively predictable fashion.
Examples include airlines, automobiles, steel and chemical companies.
You have to understand the business cycle well to play in this field.
This group of companies sales & profits rise and fall in a relatively predictable fashion.
Examples include airlines, automobiles, steel and chemical companies.
You have to understand the business cycle well to play in this field.
Turnarounds
These companies are battered, almost on the brink of bankruptcy but there's an opportunity to turn things around.
Important to study its debt structure to ensure that it can survive a crisis.
These companies are battered, almost on the brink of bankruptcy but there's an opportunity to turn things around.
Important to study its debt structure to ensure that it can survive a crisis.
The Asset Plays
Company with valuable assets that Wall Street overlook.
It could be brand name, patents, cash, real estate or sometimes even in a company's losses.
Here's a great example π
Company with valuable assets that Wall Street overlook.
It could be brand name, patents, cash, real estate or sometimes even in a company's losses.
Here's a great example π
3. The two-minute drill
Peter Lynch practice giving a two-minute monologue that covers:
(1) the reasons why heβs interested in the stock,
(2) what will make the company succeed and
(3) the pitfalls that stand in its path before he buys the stock.
Peter Lynch practice giving a two-minute monologue that covers:
(1) the reasons why heβs interested in the stock,
(2) what will make the company succeed and
(3) the pitfalls that stand in its path before he buys the stock.
That's it for today!
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