Peter Lynch: One Upon Wall Street

Sunjun Lee

Brandeies University

Who is Peter Lynch?

-Famous investment expert, one of the most successful fund managers in the U.S.

-He grew assets of Fidelity Investments from $20 million to $14 billion in 13 years.

-Lynch has written number of books on investing, including One up on Wall Street.

Before we go on..

• “investing without research is like playing stud poker and never looking at the cards.” – Peter Lynch

• 2 types of investing analysis a) Fundamental b) Technical

• Peter Lynch, Benjamin Graham, Warren Buffet-> Fundamental Approach.

Quotes from the Book

• 110: no expert can precisely predict the market.

• “if you spent more than 13 minutes analyzing economic forecasts, you’ve wasted 10 minutes.” –Peter Lynch

• 142: Stocks like GE is a good stock, but since the market cap is about 1% of GNP, high growth % is not possible. With everything equal, invest in smaller caps.

Ground Rules

• Invest in what you know

-This ground rule applies to both amateur and professional investors.

-It is good to find a new area to learn about, but, always, be sure to invest in the business, and the company that you confidently understand.

Ground Rules

• Invest in stocks that other people do not know.

There is not much opportunity in companies that already have people’s attention. Find boring, small, unknown companies for the best opportunities.

Ex) Bare Essential

Ground Rules

• Mutual Fund

• If you do not have much time to do enough research about the companies to invest in, mutual fund is an option for small returns.

Ground Rules

• It is futile to predict

• Don’t worry about the market noise. Concentrate that energy to find more fundamentals about the company that you are investing in.

Types of Companies

Low Growth Companies

• Companies with growth rate that is almost equivalent to GNP growth rate.

• The stock chart looks flat.

• Regular dividend payment-> they don’t focus on expansion because they are already big.

Big Blue Chip companies

• Yearly growth about 10%

• Stable in economic fluctuation

• Low risk, low return.

• Avoid diversification, and overvaluation.

Growth Companies

• 20~25% yearly growth.

• Financial structure is pretty fragile compared to blue chip companies.

• Check if the financial structure is firm, and possibility for quick expansion.

Economic based companies

• Returns, and stock prices depend on the economy for this type of stocks.

• Look for inventory, and current market supply and demand.

• With an edge in the near future in the market, it is possible to gain profit from investing in this type of companies.

• Timing is Key

Transitional Companies

• High Risk, but high return could be achieved if the transition is successful.

• Look for possibility if the company could come back.

• Lynch compared to criminals, homeless people, with healthy body.

Asset centered companies

• The asset that you know is undervalued in the company, but others don’t know.

• The asset could be real estate, cash, bond, or even a management team.

• With the right edge in the asset the companies own, you could expect return as the asset gets correctly valuated.

Little piece of advice

• Invest only with amount that the loss from investment will not affect your everyday life.

• Know thyself.

You can find the book at

• http://www.amazon.com/One-Up-Wall-Street-Already/dp/0743200403/ref=sr_1_1?ie=UTF8&qid=1416346312&sr=8-1&keywords=one+upon+wall+street