Peter Lynch Book Excerpts from “One Up On Wall Street"

Peter Lynch is an American investor, mutual fund manager, and philanthropist. As the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, Lynch averaged a 29.2% annual return, consistently more than double the S&P 500 stock market index and making it the best-performing mutual fund in the world.

 

Some pointers which are useful for investment in companies:

1) Understand the nature of the companies you own and the specific reason for holding the stock. ( it is really going up ! Doesn't count.)

2) Look for small companies that are already profitable and have proven that their concept can be replicated.

3) Be suspicious of companies with growth rates of 50 to 100 % a year. Avoid hot stocks.

4) It's better to miss the first move in a stock and wait to see if a company's plans are working out.

5) Avoid tips, even if the tipper is very smart, and his/her last tip went up.

6) Look for companies with niches.

7) Companies that have no debt can't go bankrupt.

8) Managerial ability may be important, but it's quite difficult to assess. Base your purchases on the companies prospects, not on the president's resume or speaking ability.

9) A lot of money can be made when a troubled company turns around.

10) Look for companies that consistently buy back their own shares.

11) Look for companies with little or no institutional ownership.

12) Favour companies in which management has a significant personal investment over companies run by people that benefit only from their salaries.

13) Insider buying is a positive sign, specially when several individuals are buying at once.

14) Devote at least an hour a week to investment research. Adding up your dividends and figuring out your gains and losses doesn't count.

15) Invest at least as much time and effort in choosing a new stock as you would in choosing a new refrigerator.

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