ONE UP ON WALL STREET BY PETER LYNCH and JOHN ROTHCHILD BOOK'S REVIEW AND SUMMARY.

 

Introduction.

This book is written by a man who do not require any introduction, mutual fund superstar Peter Lynch. It's recommended to every aspiring investor as well as investors with few weeks of experience in markets, this book is for investors looking for a great way to uplift their upcoming investing approach.

The book comprises simple terms, which are easy to understand and implement, so if you are looking for something that has simple terminology and well written and structured in a great way for a smooth understanding of a beginner investor, this is what you should start with.

Quote to remember- "All the math you need in the stock market you get in the fourth grade. "

 

 

TOP 5 LESSONS FROM ONE UP ON WALL STREET.

1.STALWARTS- 

These businesses are somewhat established business that will certainly remain in business for upcoming years, they are going to give steady returns over the long horizon, you can't expect multi- baggers from them, they usually trade for a bit higher valuations, they are growing at a 10%-12% compounded annual growth rate(CAGR) for 5 years.There should be 1 or 2 stalwarts comprising your portfolio so that you get good dividends, your portfolio will do will in recession.

2.CYCLICALS -

These types of businesses are usually having a pattern in their profits, like the auto sector, steel sector, chemicals, etc. When the economy flourishes, cyclical can be multi-baggers, but the most important point is to remember that you should be able to exit when the cycle of profits is about to fade.There should be atleast one cyclical in your portfolio, as they give very handsome returns during good economy.

3.FAST GROWERS -

This is something every investor look for and that's multi-baggers, these businesses are once having a high probability for multi-baggers, they are growing their profits at 20%-25% CAGR, they are expanding quickly as well, there is a potential for growth in the market segment in which the company is operating, few FIIs & DIIs or no FIIs & DIIs have their holdings in that particular company, and a handful of people have heard of these types of companies.You must have 3-4 fast growers in your portfolio for great investing result overall.

4. HOW TO FIND A MULTI-BAGGER- Let's see how to go about while looking for a multi-bagger.

• The company name seems to be boring, ridiculous, or dull, the company does some boring business, an unusual business like selling bottle caps, making plastic fork, waste management business, etc.

•  Insiders are buying, buyback of shares by the management.

• Free Cash flow of the company must be good, PEG ratio =1(PEG=P/E /5years CAGR  ), DEBT/EQUITY ratio must be less than 1. 

•  Management must be taking shareholder-friendly decisions.

5. WHEN TO SELL-

• The fundamentals of the company eventually gets deteriorated.

• The company lost its market share for 2 consecutive years and giving excuses for this rather accepting their flaw in their product line, less spending on Research & Department, no new products have been made in recent years.

• Two recent acquisitions of unrelated businesses look like worst diversification & company announces further acquisitions, the company has paid too much for its acquisitions that the balance sheet of the company has deteriorated from debts.

• The company has tried to cut costs but still can't compete with foreign producers.The growth rate of profit and sales are coming down.Inventories are piling up.

REVIEW OF THE BOOK- 

Peter Lynch is an American investor, mutual fund manager, and philanthropist. As the manager of the Magellan Fund, Lynch averaged a 29.2% annual return. During his 13 year tenure, assets under management increased from US$18 million to $14 billion.

This is a book seen in the hands of every beginner investor and a seasoned investor as well, this book gives simple ways by which we can remain invested for long periods in the markets, analyzing companies by our common sense and simple understanding, by far this is one of the best books on fundamental analysis, and I recommend this to all.

These principles have helped Peter lynch achieve great success for him as well as his fund and shareholders of his fund, there is a huge probability of getting benefited from it.

 
Wishing you all a great investing journey ahead......