StockBox Book Rec: One Up on Wall Street
By Peter Lynch
Click Here to Check it out on Amazon
Recommended for Investors of All Experience Levels
Review By Chandler Lutz
The Short Story:
One Up On Wall Street is one of the best stock books I have ever read. In this book, Lynch covers all sorts of companies and scenarios as well as what makes a company a great investment. If I could only own one book; this would be it.
In Depth Analysis
Peter Lynch is the most famous mutual fund manager in history. While at the helm of Fidelity Magellan, Lynch returned an astonishing 29 percent a year for thirteen years. In this book, Lynch lays out the groundwork for finding and analyzing successful companies in an easy and fun to read fashion.
Lynch first describes that every investor has what he calls an “amateur edge.” Basically, the amateur edge is the advantage normal investors like you and I have over the professional money managers living in their penthouse apartments. This edge revolves around using our everyday interactions to identify potential investments. Lynch contends that when you go shopping, go to work and live your daily life you come in contact with companies that may be great investment opportunities. For example, I was eating Chipotle burritos well before McDonalds spun it off into a public. I knew long before many Wall Street analysts that Chipotle had great potential.
The amateur edge is a powerful concept, but this idea is where many critics attack Lynch’s philosophies. Many investors used their amateur edge and invested in companies just because they liked the product. However, just as Lynch states in the introduction to the Millennium Edition of the book; just because you like a company doesn’t mean it’s a great investment. Remember Krispy Kreme doughnuts? During the last recession (and the Atkins craze), Krispy Kreme doughnuts were coolest things out there. Krispy Kreme could sell the unhealthiest doughnuts on the planet to people who wouldn’t even eat wheat bread. In fact, when they opened one up by my house, their store created traffic jams for miles in every direction and the police had to monitor the crowds to make sure things didn’t get out of control. Despite all this hysteria, Krispy Kreme was not a good investment. Sporting astronomical earnings multiples, Krispy Kreme became a quick way to lose your all your money as the company was later seen as the epitome of mismanagement. Lynch covers these ideas further in the book.
The fun in One Up On Wall Street doesn’t stop there. Lynch goes on to discuss all sorts of investments and mentions different categories for companies that I often use in my commentary at StockBoxFinancial.com. In short, these stock categories are Fast Grower, Medium Grower, Slow Grower, Cyclical, Asset Play and Turnaround.
This book is written for beginners, but I do think this book helps even the most experienced investors learn new techniques and brush up on old ones. My copy is battered, highlighted, marked and completely worn. I’m not exactly sure, but I think I have read this book cover to cover about four or five times. In fact, I usually can’t start reading sections of this book when I have things to do because I end up reading about 100 pages before I can put the book down (Ok, I’m a dork. I know it. If you want to tell me what a dork I am, or talk about Peter Lynch investing, you can contact me here).
Overall, this book is fun to read and extremely useful at the same time; a feat accomplished by very few investment books. If you don’t own it, I strongly suggest you buy it (click here for Amazon) and if you do own it you should go read it again.
Chandler Lutz does not own shares in any companies mentioned at the time of publication.