One Up on Wall Street - 8 Lessons from Investing Legend Peter Lynch (+PDF)
Today, we discuss 8 Lessons from the Investing Classic One Up on Wall Street by one of the most successful investors of all time, Peter Lynch. You also get a free One-Page PDF with all Learnings.
Peter Lynch managed the Magellan Fund for Fidelity from 1977 to 1990. His average annual return over that 13-year period was 29%, a track record matched by only a handful of professional investors.
He was known to encourage the average person to invest. He wrote books and gave speeches to educate them on the most common mistakes and important aspects of investing. One Up on Wall Street was such a book.
Before we start, here’s the Schedule for the next Research Platform Posts:
Thursday 28sth: New Research Article on a Huge Small Cap Opportunity (Might make it into the Portfolio)
Monday 1st, April: New Monthly Deep Dive, this time on Adobe
Now, let’s discuss 8 of the most Important Lessons of One Up on Wall Street:
1. Know What You Own and Why
You must be able to explain in 2 minutes or less what a company does and why you own the stock. If you can’t do that, you do not understand the company. Your decisions will be influenced by the market rather than the business.
2. Outplaying the Big Money
In the last decades, institutions have taken over the stock market. But that can be an advantage.
Play in fields they can’t play to win the big prizes:
(a) Small, illiquid industries
(b) Unpopular stocks their big Clients don’t want
(c) Geographies they don’t care about.
3. Of course, You Worry
There’s always something to worry about. Even in the best of times, there are uncertainties. That’s part of the game. And it’s good to be aware of them, but never let them stop you from investing in a good company.
4. Personal Edge
Your personal edge is something no Wall Street analyst has. Invest in what you know based on your job, hobbies, or experience as a customer. Often, the companies you appreciate as a customer or worker are great businesses, and great businesses often turn into great stocks.
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5. Earnings = Performance
In the short term, earnings and financials can be ignored. Stocks react to headlines and macroeconomic situations. In the long term, there is a 100% correlation between a company's success and the stock's success. Look for mismatches between stocks and earnings.
6. Long Shots Almost
Always Miss Long Shots rarely work in the stock market. They feel more common than they are due to the survivorship bias. For one that worked out, there are thousands that didn’t. But we don’t remember those. Do not believe in empty promises and utopies.
7. It's a Numbers Game
If you research 10 stocks, you might find a good one. If you research 50 stocks, you might find five good ones. If you research 100 stocks... you know the drill. Buffett used to go through thousands of stocks. The really great opportunities were obvious. But often, they were the five hundredth stock he looked at.
8. Afford to be Patient
Patience is among the most important virtues of investing. If you choose good companies at fair prices, you have all the time in the world. Only when you buy hot stocks and long shots, time becomes your enemy
You can download this graphic as a PDF here: Peter Lynch One-Pager
Or at my Investing Resources (together with dozens of other valuable and free PDFs:
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