One Up On Wall Street Book Summary, by Peter Lynch, John Rothchild

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1-Page Summary of One Up On Wall Street

Investment Vehicles

The next time you see a Subaru, think about this: If you had invested $6,410 in the company’s stock instead of buying that car, and then sold it for $2 per share in 1986, you would have earned exactly one million dollars. That is why it is important to invest your money wisely and find great stocks through your personal experiences. For example, Taco Bell was discovered by Peter Lynch after he ate there many times. La Quinta Motor Inns was found when he stayed at one during a vacation. Volvo gained his interest because of his wife’s love of the brand; Apple Computer became an investment opportunity after he used their computers; Dunkin’ Donuts was discovered while eating donuts with friends; Pier 1 Imports came up as a result of shopping there often.

As an individual, you have significant advantages over institutional investors. You can spot new products and companies before the professionals just through your daily experiences. Before investing, ask yourself:

  • What do you expect to get from your investment? * Are you investing for the near term or the long-term? Think long-term. * How will you react if the stock price suddenly drops? Ignore short-term fluctuations. * Invest in a house before putting your money into stocks because research is key to successful investing and macroeconomic trends are irrelevant.

Finding a “Tenbagger”

When a stock earns a tenfold return, it’s called a “tenbagger.” To find these stocks, you have to go shopping. The first indication that a stock is going to grow rapidly is warm response from consumers. As consumers, we have an edge in finding potential tenbaggers because of our exposure to successful companies and their products. However, working in any industry also gives us an advantage because it exposes us to great businesses and their products as well. This gives us an advantage when uncovering potential tenbaggers. To start your research on any company or product, first find the company‚Äôs story; this should take no more than two hours at most for each business you’re researching (unless they’re very small). Also if you are basing your consideration on one particular product that the company sells determine what effect that product will have on the company if it becomes the smashing success you anticipate. Determine how large the firm is since smaller firms tend to be more volatile than larger ones with big value swings associated with them as well. Finally, determine what type of business they are in. There are six categories:

  1. There are three kinds of companies. 1. Slow growers – These large, established companies will grow at the same rate as the economy. 2. Stalwarts – These established companies are a bit more dynamic but still not very nimble 3 Fast Growers- Generally speaking, these small and aggressive growing companies can help you succeed in your portfolio

  2. Some companies are affected by the ebb and flow of business. Automobile manufacturers, airlines, tire, steel and defense all tend to be cyclical.

  3. Companies that own valuable assets are often overlooked by investors. Investors sometimes overlook things, so you should look for companies with valuable assets to invest in.

  4. “Turnarounds” are great companies to invest in. They can recover from financial problems quickly, and they have a lot of resources to do that.

Investors should monitor their investments so that they don’t lose money on a bad stock.

Getting the Story

A company’s story is the narrative explanation of why it will succeed. It helps to know about a company’s business, but if you don’t have that knowledge, look for other things like market dominance or simple manufacturing processes that make it easier to run. Look for these 13 additional traits:

One Up On Wall Street Book Summary, by Peter Lynch, John Rothchild

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