You can purchase “One Up On Wall Street” By Peter Lynch here if you would like to read the book in full.
One Up On Wall Street Book Summary
One up on wall street, a book written by Peter Lynch, is one of the greatest books to read for anyone looking to pick out individual stocks and start investing and making gains in the stock market.
Here is the One Up On Wall Street Book Summary so you don’t have to read the full thing yourself.
Wall Street has us believing that the people who work there are some gods of finance, that we mere mortals could never compete with their results and know-how, and that the stock market is far too complex for the general public to understand.
History of One up on wall street
One Up on Wall Street is a fantastic book with very useful and practical investing advice.
The fact that this book was written in 1989 and is still relevant today inspires confidence, and should tell you all you need to know in terms of a book review.
If you want a book that can give you instructions on how to become financially independent, this is the best book for you.
It requires some effort on the part of the reader to apply the advice presented in the book, but the rewards are well worth it.
Normal Retail Investor
One up on wall street aims to answer the question:
Can an average retail investor like you and me make the returns the so-called professionals on wall street can make in the same bull market?
Is arming non-finance professionals with all the information that they need to succeed could give them an advantage over wall street?
How Peter Lynch’s simplistic approach to investing makes him a successful investor.
In the book One up on Wall Street by the infamous investor Peter Lynch, he talks about how his simplistic approach to investing has put him on the path to him becoming one of the greatest stock market investors of all time.
There are thousands of stocks traded in various financial markets every day, and many of these stocks will not do very well, but on the other hand, several stocks will go on to make significant gains for investors year after year.
Multi baggers.
With every stock you invest your hard-earned money into, there is a chance that this stock could become the next unicorn, or as Peter Lynch calls them, “multi-baggers.”
He refers to multi-baggers as stocks that have the potential to double, quadruple, or even 10x your initial investment.
This is the elusive ten–bagger!
We will reveal how Peter Lynch looks for these kinds of stocks and summarise the key points from the book One up on wall street.
Great quote from Peter Lynch.
A great quote from Peter Lynch goes as follows:
“The trick is not to acquire the knowledge to trust your feelings, but rather to control yourself to ignore them. Stand by your stocks as the company’s fundamental story hasn’t changed.”
Several ways to start looking for unicorn stocks.
There are many ways we can start to look for these unicorn stocks or ten-baggers.
The book offers advice on the six categories of stocks you should be aware of and know which one is best for you.
You, as an investor, will have a specific category you fall into, including traits like tolerance to risk and your budget.
Still, according to the book Peter Lynch also categorizes types of stock into six different types, which are as follows:
Sluggards or slow growers.
The financial world’s sluggards are big companies that have been around for a long time. They were once fast growers but have fallen back for several reasons.
Stalwarts or medium growers
These companies are expected to deliver 30-50% gains, with an annual earnings growth rate of 10-12%.
Peter likes to keep some of these in his portfolio because they offer protection during market slumps.
Peter quotes:
“you know you won’t go bankrupt, and soon enough, they will be reassessed, and their value will be restored.”
Fast growers.
Fast growers are the favorites of Peter Lynch. They are small aggressive new enterprises that grow 20-25% a year.
This is the category to explore if you want to find the 10 to 40 bagger stocks.
According to Lynch, fast-growing companies may be part of the same fast-growing industry, but he prefers fast growers in slow growth same industry.
The winning hot stocks in this category were retailers who learned to succeed in one place and replicated their formula in different locations, such as Walmart, Taco Bell, and Yum Brands.
Cyclicals.
A cyclical company has sales and profits rise and fall in a regular, if not wholly predictable, fashion. In contrast to fast growers, cyclical industries expand and contract almost continually.
Some examples include the auto, airline, and steel growth industries. Cyclical hot stocks do well as economies come out of recession and expand.
Turnarounds.
“These aren’t slow growers; these are no growers.” Lynch said turnaround companies are “battered, depressed, and often can barely drag themselves into Chapter 11.”
If the company survives and fixes its problems, however, it can rebound quickly, and stock prices tend to be least related to the overall market.
Asset plays.
This could be “any company sitting on something valuable that you know about but that the Wall Street crowd has overlooked.”
Lynch said these are situations where a local edge provides the greatest advantage.
One example was the Pebble Beach golf course, once public but bought out for $72 million. The new owner sold a gravel pit on the same property a day after buying it for $30 million.
Hidden Or Not-so-Hidden Assets.
There were (and are) many hidden or not-so-hidden assets in many companies and industries; investors should start by looking for how much free cash flow is on the books.
Don’t forget that companies can move around between these categories, too, as well as being able to occupy more than one category at a time.
For example, fast growers can often run out of steam and become stalwarts or sluggards.
Peter Lynch comments.
Peter Lynch comments at the end of the chapters about stock categories by saying:
“Putting stocks in groups is the first step in developing the story. Now at least, you know what kind of story it is supposed to be. The next step is filling in the facts to help you guess how the story will turn out.”
Earlier, we mentioned the infamous ten-bagger stock.
This is an expression that Peter Lynch uses to describe a stock that has the potential to or has already increased its stock price by ten times.
If you can get hold of a few of these over your investing lifetime, you will have an excellent personal investment research portfolio.
Different types of stocks.
Peter advises that you need to treat different types of stock differently and gives us a list of positive signs to watch out for when investing in a stock and trying to find a ten-bagger.
The company name is dull, or even better, it’s ridiculous.
“The perfect stock will be attached to the ideal company.
The perfect company has to be occupied in a simple business, and the simple business follows the rules to have a perfectly boring name.
The more boring it is, the better.”
Stock price even higher.
“I get even more thrilled when a company with a repetitious name also does something repetitious.”
“A company that does repetitious things is almost as good as a company with a repetitious name, and both together are terrific.
Both together are guaranteed to keep the oxymorons away until good news compels them to buy in”
The company does something unpleasant.
“Better than repetitious alone is a boring stock and repellent simultaneously. Something that makes people shrug, retch, or turn away in disgust is ideal.”
The company is a spin-off.
“When a division or part of a company is spun off into its own, freestanding entity—such as Safety-Kleen or Toys “R” Us out of Interstate Department Stores—investors can see incredible returns on their investments.”
“When new companies are created from the assets of another company, they are usually profitable and well-positioned to succeed as independent entities.
Once they are granted independence, new management can cut costs and take creative measures to improve their performance.”
Institutions don’t own it, and many analysts do not follow it.
“If you find a stock with little institutional ownership, you may have discovered a hidden gem.
Of course, there are many companies that no analyst has even visited or would admit knowing about.
But you may have found an investment winner if you find one of those companies.”
Something is depressing about the company.
The mortuary business is a good example of this.
“Rather than consider their mortality, Wall Street professionals prefer to focus on the price of toxic waste.”
The company’s industry needs to grow.
“There is no problem with competition in a stagnant industry, especially one that is boring and upsets people.
You don’t need to think about the competition of other companies because no one else is interested in your industry.
That gives you the freedom to continue to grow and gain overvalued market share.”
The company has got a topic.
“I always look for niches. The perfect company survives only when they have a niche that is not yet filled by competitors.”
“Drug growth companies along with chemical companies have niches—products that no other company is allowed to make.”
It has recurring revenue streams, or people have to keep buying it.
“When investing in the toy industry, I prefer to put my money into companies that make drugs, soft drinks, razor blades, and cigarettes.
You see, everybody needs to use these products, but only one person gets to own a certain brand or type of product.
Insiders are buying into it.
“If you’re thinking about a stock tip, it’s very helpful to know that people associated with the company are doing so as well.”
The company is repurchasing its stock.
Buying back shares is a simple and effective way for a company to reward its average investor.
If a company has faith in its future, why wouldn’t it invest in itself, just as the shareholders do?
The traits of a reverse ten bagger.
Of course, as with anything, there are also traits in a companies stock you want to avoid, and here are the five traits of a reverse ten-bagger:
The company is in a hot stock industry.
“If you tried to profit by investing in the hottest stocks in each successive hot industry, soon you’d be on welfare.”
The product is the next best thing.
“If you find a stock touted as the next IBM, the next McDonald’s, or the next Intel, don’t buy it.
My experience has shown that companies that try to be like other successful companies often fail.”
The company is a whisper stock.
Sometimes, people will tell you about a company they think is a great investment opportunity. Most likely, they have been talking about this company to every other person.
Those are whisper stocks with a hypnotic effect and a psychological appeal.
Those are the key points from One up on wall street by Peter Lynch.
I know there was a lot to digest in this, so feel free to use this article as a reference next time you look at what stock to buy.
Final thoughts.
If you are new to the stock market or want to get things right the first time, I recommend this book.
One Up On Wall Street is a top read if you want to understand better how the modern investment system works and how you can use that to your advantage.
You will learn a lot about how the stock market operates and how to beat them in their own game.
One Up On Wall Street is the one to read if you want to understand better how the modern investment system works, and how you can use that to your advantage.
